Diwali has passed—what is the latest update on the MDR for UPI, and when will it be implemented?

Initially, this rule was set to take effect from October 15, 2026; however, following appeals from business owners during the festive season, the National Payments Corporation of India (NPCI) decided to defer its implementation until after Diwali.

With the festival of Diwali now over, the 'Merchant Discount Rate' (MDR) may soon be applied to certain UPI transactions. The National Payments Corporation of India (NPCI) has already indicated that this new system will be rolled out shortly after the festive period. However, a specific date for its implementation has not yet been finalized.

As mentioned, the rule was originally scheduled to come into effect on October 15, 2026, but the NPCI postponed it until after Diwali in response to requests from the business community during the festive season.

What are the demands of the business community?

Trade organizations such as CAIT and AIMRA are requesting that the implementation be deferred until January 1, 2027. They point out that the period encompassing Dhanteras, Diwali, Christmas, and the New Year sees a significant surge in consumer spending; introducing a new tax or charge during this time would negatively impact their profit margins.

They argue that sectors such as mobile retail and FMCG distribution already operate on very thin margins. Consequently, a 0.4% charge on UPI payments would result in a direct monthly loss of anywhere between ₹2,000 and ₹12,000 for a small shopkeeper.

When is it expected to be implemented?

Speculation suggests that a notification regarding this could be issued during the second or third week of November. The UPI MDR is a service charge levied on shopkeepers or merchants for the processing of digital transactions. The burden of the MDR (Merchant Discount Rate) will not fall on the general public. For customers, making payments by scanning a QR code at a shop or transferring money will remain completely free, just as it has always been.

Under the current rules, the MDR will apply exclusively to large business-to-merchant (P2M) transactions. All merchant payments of ₹2,000 or less will be entirely free of charges. According to the NPCI, 96% of merchant transactions in India are for amounts less than ₹2,000; therefore, small shopkeepers remain fully protected. Recent reviews suggest that the exemption threshold could be raised to further safeguard small business owners. Merchants with an annual turnover of up to ₹40 lakh could be kept entirely outside the scope of this 0.4% MDR levy.