Industry Seeks More Time For UPI MDR Rollout
The implementation of the new Merchant Discount Rate (MDR) framework for UPI payments may be postponed from October 15, 2026, to January 1, 2027.
The National Payments Corporation of India (NPCI) has reportedly received requests from merchant organisations, fintech companies and payment firms seeking more time to prepare for the new system.
The industry has raised concerns about confusion surrounding different MDR rates, applicable transactions and how the charges will be handled across the payments ecosystem.
Why Is The UPI MDR Rollout Being Delayed?
The proposed MDR system is scheduled to apply to selected person-to-merchant UPI transactions above Rs 2,000.
Under the framework, an MDR of 0.4% would apply to eligible transactions. For example, a Rs 10,000 qualifying UPI payment would generate an MDR of Rs 40.
However, the industry says several practical questions about the implementation are yet to be fully resolved.
There is also concern about introducing the new system during the festive shopping season, when UPI transactions typically rise sharply.
Small Transactions To Remain Free
The proposed MDR will not apply to all UPI payments.
Person-to-person transactions will continue to remain free, regardless of the amount transferred.
Payments to merchants up to Rs 2,000 will also remain outside the new MDR framework. Small merchants covered under the zero-MDR provisions will continue to be exempt as well.
The government has said that around 96% of merchant UPI transactions will remain unaffected by the new framework.
Payment Industry Raises More Questions
Another area of uncertainty involves financial services transactions.
NPCI has reportedly clarified certain charges for financial services payments, but industry participants have raised questions about how different types of transactions should be identified and categorised.
Payment aggregators are also negotiating with banks over how the MDR revenue should be divided.
The proposed framework provides a share to acquiring banks, while payment aggregators are seeking a portion of that amount to cover their costs and operations.
Final Decision Expected Soon
NPCI is expected to take a decision shortly following discussions with the finance ministry and other stakeholders.
If the postponement is approved, merchants and payment companies will get additional time to understand the framework and make the necessary changes to their systems.
The proposed MDR structure itself is not expected to change as part of the possible delay.
UPI Users Unlikely To Be Directly Charged
Importantly, MDR is a fee paid within the merchant-side payment ecosystem and is not intended to be a direct charge on UPI users.
The Reserve Bank of India has also indicated that the small fee is unlikely to significantly affect overall UPI transaction volumes.
The immediate question, therefore, is not whether UPI will become chargeable for users, but when the new merchant-side MDR framework will actually come into force.
Summary
NPCI may postpone the implementation of the new UPI MDR framework from October 15, 2026, to January 1, 2027, following requests from merchants, fintech companies and payment firms. Industry players want more time to resolve confusion around rates and transaction categories. The proposed 0.4% MDR will apply only to specified merchant transactions above Rs 2,000, while most UPI payments will remain free.