UPI MDR Charges: There were plans to implement Merchant Discount Rate i.e. MDR on UPI payments from October 15, 2026. Now it may be postponed till January 2027. There is less than a week left for this rule to come into force. In such a situation, merchant associations, fintech companies and companies providing payment services have demanded NPCI to take it forward. According to sources, the National Payments Corporation of India (NPCI) may take a major decision in this regard in the next two days. Discussions are also going on with the Finance Ministry on this issue.

Traders appealed during the festive season

Industry says they are not fully ready to adopt this new system at present. The biggest reason is huge confusion regarding various MDR rates, policies and their implementation. Diwali and other major festival shopping is going to start in the country in the coming days. Organizations associated with the payments industry argue that the decision should be postponed until the festive season is over.

The government also fears that the imposition of MDR during festive sales will increase the cost of doing business. The impact of inflation is already visible in the market, putting pressure on the purchasing power of the common man. In such a situation, if merchants are burdened with additional charges, they may pass it on to consumers in some form. This may dampen the buying spirit of consumers during the festive season.

What is the new MDR rule?

MDR is the fee that merchants pay to banks for accepting digital payments. Last month, the UPI Steering Committee approved Rs. The MDR was fixed at 0.4 per cent or 40 basis points on transactions above 2,000.

If this rule is implemented, the shopkeeper or merchant will have to pay Rs 8 on a UPI payment of Rs 2,000. Similarly, a fee of Rs 40 will be deducted on a transaction of Rs 10,000. NPCI has decided to implement this system from 15 October 2026. However, the industry now says the system lacks technical and policy clarity, which is proving difficult to implement immediately.

UPI system becomes more complicated than card

The structure of UPI looks very complicated compared to card payments. Generally, all merchants who accept card payments have a category code. The card network processes and verifies transactions based on these codes. These rates are almost the same across all card networks. In contrast, in case of UPI, different rates have been fixed for different services.

Different rates are kept for utility bills like electricity and water, loan repayment and capital market related investments. Interestingly, many of these payments are not allowed through cards. For example, RBI does not allow credit cards to be used for loan repayments or investing in the stock market. Before the advent of UPI, all these functions were done through net banking, IMPS, NEFT or RTGS. They had charges, but no MDR system like cards. There banks used to charge both sender and receiver.

Great confusion in loan and stock market transactions

Capital market companies have expressed their concerns to the market regulator in this regard. Broking firms say that when a customer adds money to his trading account, it is like a direct transfer (P2P) between two people. Broking companies do not derive any direct income from this money, hence it is not appropriate to impose MDR on them.

Another major confusion is regarding loan installments. As per NPCI notification, on loan repayment with autopay mandate only Rs. A flat fee of 5 will be charged. But small loan customers often don’t have a fixed balance in their account, causing auto-debit to fail. After this, when the customer pays the installment himself, the system treats it as a normal financial institution payment. In such a situation, a hefty MDR charge of 0.4 percent has been imposed on them.

NPCI has clarified that only Rs 5 will be charged on all types of loan payments. But banks and payment aggregators have no technical means by which they can distinguish between normal financial transactions and loan repayments. The entire industry has sought time from the NPCI to rectify these deficiencies.