NPCI announced on Tuesday that the 0.4% merchant discount rate (MDR), which was slated to take effect on 15 Oct, will be suspended until immediately after Diwali 2026 to avoid adding costs during the country’s biggest retail surge. The tariff, capped at ₹300 for transactions above ₹75,000, applies only to person‑to‑merchant (P2M) UPI payments that exceed ₹2,000, leaving 96% of P2M transactions untouched.
The decision follows weeks of pressure from merchant associations and trade bodies that argued a new fee during the festive season would squeeze already thin margins. One small‑business owner in Mumbai said the extra 0.4% would mean the difference between a sale and a loss when customers are already looking for discounts.
The MDR framework, approved by NPCI on 15 Sep, was meant to generate a revenue stream for the payments ecosystem after six years of effectively zero fees on UPI. By deferring the roll‑out, the government sidesteps a potential hit to consumer spending at a critical time, while still maintaining the framework’s long‑term viability.
NPCI will notify the exact effective date in the coming weeks. Meanwhile, banks, payment aggregators and merchants are being given until the New Year to re‑engineer their systems and software to accommodate the eventual fee structure.