The government is reportedly considering postponing the implementation of the Merchant Discount Rate (MDR) on large Unified Payments Interface (UPI) transactions by a few months. The charges, which were scheduled to take effect on October 15, may now be introduced in January, according to a Reuters report citing an industry executive and a regulatory official familiar with the discussions. Moneycontrol had earlier reported the possibility of a delay in the rollout. However, the final decision is yet to be announced by the authorities. Under the proposed framework, merchants receiving UPI payments exceeding ₹2,000 would have to pay a transaction fee. For most eligible merchant payments, the MDR would be 0.4% of the transaction value, subject to a maximum limit. Meanwhile, transactions involving certain specified categories would attract a fixed charge of ₹5. Person-to-person (P2P) transfers would remain exempt from the fee. The proposed changes mark a shift in the existing UPI payment structure, which has largely operated without direct transaction charges for users and merchants under the zero-MDR framework.

Why Is the Government Considering a Delay?

According to the Reuters report, the National Payments Corporation of India (NPCI) has not yet taken a final decision on postponing the implementation date. One of the sources indicated that a decision could be made within the next few days. A possible delay would give banks, payment service providers and other companies in the digital payments ecosystem additional time to update their systems and prepare for the new fee structure. These changes may require adjustments to payment processing systems, merchant agreements and transaction settlement procedures. Moreover, the existing implementation date falls during India's festive season, when digital transactions and consumer spending generally increase. Postponing the rollout could help payment companies and merchants avoid introducing major operational changes during this busy period. The report cited sources who were not identified. JUSZNEWS has not independently verified the information, and the proposed postponement should therefore be treated as a reported possibility rather than a confirmed government decision.

What Are the Proposed UPI Merchant Charges?

The new MDR framework introduces two different fee structures for eligible UPI payments exceeding ₹2,000. The applicable charge will depend on the type of merchant receiving the payment.

1. Fixed ₹5 Fee for Four Merchant Categories

A flat MDR of ₹5 per transaction would apply to payments exceeding ₹2,000 made to merchants in four specified categories:

• Railways
• Telecom services
• Insurance
• Fuel outlets

For example, if a customer makes a UPI payment of ₹10,000 at a railway ticket counter, fuel outlet, telecom service provider or insurance company, the merchant would be charged a fixed fee of ₹5 under the proposed framework. This means the fee would remain the same regardless of whether the eligible payment is ₹3,000 or ₹10,000.

2. MDR of 0.4% for Other Eligible Merchant Payments

For other eligible person-to-merchant (P2M) UPI transactions exceeding ₹2,000, the proposed MDR would be 0.4% of the transaction amount. However, the fee would be capped at ₹300 per transaction. For instance, if a customer pays ₹10,000 through UPI to a merchant outside the four specified categories, the MDR would amount to ₹40. Similarly, a payment of ₹5,000 would attract a fee of ₹20, while a payment of ₹20,000 would result in a fee of ₹80, provided the transaction falls under the applicable category. The proposed structure is designed to distinguish between specific essential-service categories and other merchant transactions.

Which UPI Transactions Will Be Exempt From MDR?

Not every UPI transaction will attract the proposed charges. Four categories of payments have been exempted from the MDR framework. The exempt categories include:

• Person-to-person (P2P) transfers: Money sent directly from one individual to another will not attract MDR.
• P2M payments up to ₹2,000: Merchant payments of ₹2,000 or less will remain exempt.
• Person-to-person merchant (P2PM) payments: Eligible transactions involving small vendors under this category will not attract the proposed charge.
• RuPay debit card transactions: All RuPay debit card transactions will remain exempt from the specified MDR.

The P2PM category covers small vendors who receive up to ₹1 lakh per month directly into their bank accounts through UPI QR codes. These exemptions mean that the proposed changes would primarily affect eligible high-value payments made by customers to merchants, rather than routine transfers between individuals or smaller merchant transactions.

What Is the Legal Basis for the New Charges?

The proposed changes follow the passage of the Taxation and Other Laws (Amendment) Bill, 2026, by Parliament on August 11. The legislation amended Section 10A of the Payment and Settlement Systems Act, 2007, giving the government the authority to permit charges on specified digital payment methods. Following the introduction of the new framework, the MDR structure was outlined for eligible UPI transactions exceeding ₹2,000. The proposed charges are intended to apply according to the merchant category and the nature of the transaction. However, the reported possibility of postponing the rollout means that payment companies and merchants may have additional time to prepare before the new rules take effect.

What Does the Possible Delay Mean for Customers and Merchants?

If the implementation is postponed until January, payment companies and merchants would receive additional time to make the necessary technical and operational arrangements. For customers, the proposed framework does not introduce a direct MDR charge on person-to-person transfers or eligible merchant payments of ₹2,000 or less. The charges are structured around qualifying merchant transactions, with different rates applying to different categories. For businesses, the impact would depend on their transaction volumes, merchant classification and payment arrangements. Eligible merchants would need to understand which fee applies to their transactions and how the charges would be handled under the final rules. At the same time, the reported delay could help the payments industry manage the transition without disrupting services during the festive shopping period.

Final Decision Still Awaited

Although the government is reportedly considering shifting the rollout from October 15 to January, the NPCI has yet to make a final decision, according to the sources cited by Reuters. Until an official announcement is made, the proposed January timeline remains unconfirmed. The final implementation date will determine when payment companies and eligible merchants must begin operating under the new MDR framework.