Government Weighs Delay on UPI MDR Rollout Amid Reports of No Fees Starting October 15
The Indian government is considering postponing the implementation of the Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions to January 2027. Originally set to take effect on October 15, 2026, this delay aims to avoid disruption during the festive season, according to a regulatory official and an industry executive. The MDR would impose a 0.4% fee on transactions exceeding Rs 2,000, marking the end of the zero-fee regime for UPI.
The UPI system, utilized by over 500 million users for a wide range of transactions, has been a cornerstone of digital payments in India. The introduction of the MDR coincides with the annual festive season, which typically sees a surge in consumer spending. Sources indicate that deferring the fee would provide payment companies with additional time to adjust their systems and prevent potential disruptions in retail payments.
Following news of the possible delay, shares of Indian digital payment companies experienced a decline. Paytm’s stock fell by 7.6%, while One Mobikwik Systems dropped 7.2%. Despite the impending fee, Reserve Bank of India Governor Sanjay Malhotra stated that a small fee is unlikely to significantly impact UPI transaction volumes, asserting that there has been no observed drop in transaction activity.
Understanding MDR on UPI
Merchant Discount Rate (MDR) is the fee charged to merchants for accepting payments via credit or debit cards. This fee is typically a percentage of the transaction amount and is deducted by the bank before the merchant receives the payment. The government has confirmed that UPI will remain free for consumers, with no fees for person-to-person payments.
In September, the National Payments Corporation of India (NPCI) announced an MDR of 0.4% for Person-to-Merchant (P2M) UPI transactions above Rs 2,000. Transactions under Rs 2,000, which account for over 95% of UPI P2M transactions, will not incur any charges. For transactions of Rs 75,000 or more, the MDR will be capped at Rs 300 per transaction. A recent gazette notification clarified that banks and system providers cannot impose fees on individuals for UPI transactions of up to Rs 2,000. This follows an amendment to the Payment and Settlement Systems Act, 2007, which allows for the introduction of MDR on UPI payments.
Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.
Follow Us on Twitter, Instagram, Facebook, & LinkedIn
