UPI MDR rollout deferred until after Diwali by NPCI to protect festive trade

The National Payments Corporation of India has postponed the rollout of merchant discount rate charges on Unified Payments Interface transactions exceeding ₹2,000 until after Diwali.

The levy was scheduled to take effect on October 15, but the UPI and Services Steering Committee decided on Tuesday to delay implementation to protect festive shopping and provide businesses with ample time to adapt. A fresh launch date will be announced after the festival period concludes in November.

Dilip Asbe, managing director and chief executive of NPCI, confirmed the decision, noting that the revised timeline accommodates industry readiness during India's busiest retail quarter.

What the new UPI charges involve

Under the framework, a 0.4% merchant discount rate applies exclusively to eligible person-to-merchant payments over ₹2,000. Peer-to-peer transfers between individuals remain entirely free, and over 95% of all merchant transactions by volume will not face any charge.

For eligible higher-value payments, fee sharing is structured to strengthen banking technology: issuing banks receive 16 basis points, acquiring banks take 12 basis points, and the remainder supports payment service providers and application developers.

Why authorities are updating digital payments

The policy shift addresses the long-term sustainability of India's world-leading digital financial network. India's UPI system now costs roughly ₹21,000 crore annually to maintain and upgrade. NPCI estimates that a calibrated 40-basis-point charge on larger commercial transactions can recoup ₹13,000 crore to ₹15,000 crore in its first year, providing the domestic financial system with direct capital to enhance cyber defence, expand server capacities, and pioneer next-generation features such as delegated payments.

Reserve Bank of India Governor Sanjay Malhotra earlier affirmed that the nominal fee is unlikely to affect transaction volumes, noting that higher-value payments primarily involve commercial vendors already equipped to handle digital processing.

State trade bodies react

The deferral follows representation from regional trade groups. In Kerala, the Kerala Hotel and Restaurant Association announced on Tuesday that its members planned to stop accepting UPI payments above ₹2,000 from October 15, requesting that customers settle larger restaurant and hotel bills in cash.

KHRA president G. Jayapal and general secretary N. Abdul Razak argued that food establishments faced margin pressures and urged authorities either to scrap the rate or raise the exemption ceiling to ₹10,000.

By pushing the timeline past Diwali, the government and payments authorities have preserved consumer sentiment ahead of peak holiday commerce while keeping India's high-speed payment infrastructure on track for secure, self-sustaining expansion.