UPI MDR Will Not Start on 15 October: NPCI Defers 0.4% Merchant Charge to After Diwali

“Will my UPI payment at the grocery shop cost extra from 15 October?” That was the most common question in our inbox this week. The short answer: no. The UPI MDR, a 0.4% fee on select merchant payments that was due to start on 15 October, has been put off. On 13 October, the National Payments Corporation of India (NPCI) said the charge will be implemented “immediately post-Diwali”, on a date it will notify separately. This post explains what changed, what has not, and what customers and shopkeepers should do in the meantime.

UPI MDR: what NPCI announced on 13 October

In a notice dated 13 October 2026, NPCI said its UPI and Services Steering Committee had decided that the merchant discount rate (MDR) on select person-to-merchant (P2M) UPI transactions will be implemented immediately after Diwali. The exact effective date will be announced later. The notice did not change the rates or the categories set out in the earlier circular.

So the change is only about timing. The charge structure announced in September stays as it was, as far as public information shows.

The UPI MDR structure, as announced in September

NPCI’s circular of 15 September set out the charge, according to news reports including Hindustan Times. We covered it in detail in our UPI MDR explainer. Here is a summary:

Source: NPCI circular of 15 September 2026 as reported by Hindustan Times, 14 October 2026. Check your own bank or payment app’s notice once NPCI announces the new date.

What the fee works out to

To see how small or large the charge is, here is what a merchant would pay at 0.4% on a few bill sizes. These are our calculations based on the reported rate.

The cap works neatly: 0.4% of ₹75,000 is exactly ₹300, so any bill above that pays no more than ₹300.

Timeline so far

A worked example for a mid-sized shop

Take an electronics and mobile accessories shop that received these UPI payments in a month: 600 payments under ₹2,000, 80 payments averaging ₹5,000, and 4 payments of ₹80,000 each. Under the September structure, the small payments attract no MDR. The 80 mid-sized payments cost 0.4% × ₹5,000 = ₹20 each, or ₹1,600 in total. The four large ones hit the ₹300 cap, adding ₹1,200. That is ₹2,800 for the month on these figures, against ₹7,20,000 of payments above the threshold, about 0.39%. Your own numbers will differ, so work them out from your settlement statement.

Customers: what changes for you

For people paying by UPI, nothing changes today, and the fee as designed is charged to the merchant, not the customer. A few points are worth knowing:

• Sending money to family and friends stays free. P2P transfers are outside the MDR.
• Small everyday payments are not covered. Tea, vegetables, auto fares and most grocery runs fall below ₹2,000.
• A shop may try to pass on the cost. Some merchants add a “convenience” or “UPI” surcharge on card payments today. If you see one on UPI after the rollout, ask for a written bill showing it and compare with paying by cash or another method.
• Your UPI limits do not change. Daily caps set by your bank, and UPI Lite limits, are separate rules. See our UPI Lite vs UPI limits guide.

Shopkeepers: use the extra weeks

If you run a shop that takes many UPI payments above ₹2,000, the deferral buys you time to prepare. Here is a short checklist:

1. Find out which category you fall in. Ask your acquiring bank or payment aggregator whether your merchant category is among the “select” P2M categories, and whether you qualify as an essential-service merchant.
2. Estimate the monthly cost. Take your UPI receipts above ₹2,000 for September and multiply by 0.4%. If ₹3 lakh of such payments came in, the cost would be about ₹1,200 a month.
3. Read the settlement statement. After the rollout, MDR will usually be deducted before the money reaches your account. Match the deduction with the rate.
4. Decide your pricing openly. If you plan to adjust prices, do it on the price tag, not by surprise at the counter.

Why the date moved

NPCI’s notice gives the decision but not detailed reasons. The festive season is the busiest period for retail payments, and a fee change in the middle of it would have landed on merchants at their peak. The MDR has also been the subject of legal challenge, which we tracked in our post on the Supreme Court plea. We have not seen any order that stops the charge, and NPCI’s notice says it will proceed after Diwali.

What is still unclear

• The exact effective date, which NPCI says it will notify.
• The final list of “select” merchant categories, as applied by each bank.
• Whether banks and apps will show the MDR on customer receipts.

We will update this post when the date is notified.

Still unsure? These answers should help.

FAQs

Has the UPI MDR started on 15 October?

No. NPCI said on 13 October that it will begin immediately after Diwali, on a date to be notified.

Do customers pay the UPI MDR?

As announced, the merchant pays. Customers are not meant to be charged.

Is UPI to friends and family charged?

No. Person-to-person transfers remain free.

What if my failed UPI payment is not refunded?

That is a separate issue with fixed timelines. See our failed UPI refund guide.

Takeaway: The UPI MDR of 0.4% on select merchant payments above ₹2,000 will not start on 15 October. NPCI has moved it to just after Diwali, with the date to be notified. Customers sending money to people pay nothing; shopkeepers should use the time to work out their likely cost.