UPI charges after Diwali: Will customers pay extra on payments above ₹2,000? NPCI’s MDR rollout likely in Nov

With Diwali celebrations over and Bhai Dooj falling tomorrow, 11 November, attention is now turning to when the Merchant Discount Rate (MDR) on person-to-merchant (P2M) UPI transactions will come into effect.

The National Payments Corporation of India (NPCI) had earlier deferred the implementation beyond its original 15 October start date.

In an official statement issued on 13 October, NPCI said the revised charges would be implemented immediately after Diwali, with the effective date to be announced separately.

However, the festive period is now drawing to a close, and merchants and customers are awaiting clarity on when the new MDR rules will take effect.

Here’s what you need to know.

Why were MDR charges on UPI transactions deferred?

NPCI, in its 13 October statement, said that the UPI and Services Steering Committee had decided to defer the rollout to avoid introducing additional transaction costs during the festive season.

NPCI said, “Keeping in mind the festive season, Merchant Discount Rate (MDR) on select Person-to-Merchant (P2M) UPI transactions, shall be implemented immediately post Diwali at a date to be notified separately.”

How much MDR will apply to UPI transactions?

According to NPCI’s FAQs released on 15 September, an MDR of 0.4% will apply to eligible P2M UPI transactions exceeding ₹2,000. However, the charge will be capped at ₹300 for transactions of ₹75,000 and above.

For example, a merchant receiving a UPI payment of ₹1 lakh would otherwise incur a 0.4% charge of ₹400. However, with the prescribed cap, the MDR would be limited to ₹300.

Certain merchant categories, including railways, telecom services, insurance and fuel, will have a concessional flat MDR of ₹5 per transaction for payments exceeding ₹2,000, instead of the standard percentage-based rate.

A concessional MDR of 0.02% applies for capital market transactions, including payments towards mutual funds, securities, stockbrokers and dealers, subject to a maximum cap of ₹300.

Importantly, MDR is a merchant-side transaction fee that will be borne by the merchant receiving the payment, not the customer making the UPI transaction.

Will UPI transfers between individuals remain free?

Yes.

The proposed MDR will not apply to person-to-person (P2P) UPI transfers. Payments between individuals, including transfers to family members, splitting bills with friends, and transfers between one’s own bank accounts, will continue to remain free.

When will NPCI announce MDR implementation date?

The revised implementation date and other related details are still awaited from NPCI.

However, since NPCI had indicated that the MDR rules would take effect immediately after Diwali, they could be implemented this month.

Disclaimer: This is for informational purposes only. Please visit the official NPCI website for the latest updates.