As the Diwali festive season approached, traders were attentive to the upcoming changes affecting their payment costs. Meanwhile, discussions were ongoing about a proposed 0.4% merchant discount rate on UPI transactions above ₹2,000.
On 13 October 2026, the National Payments Corporation of India made a public announcement that addressed those concerns. The corporation said that the planned 0.4% merchant discount rate on UPI person‑to‑merchant transactions exceeding ₹2,000 would not be enforced during the Diwali festive season. The decision was taken specifically to ease the burden on merchants, who had been urging the government to delay the charge. The exact date for implementation after Diwali was said to be communicated later.
Under the original proposal that is now on hold, the merchant discount rate would have been set at 0.4% of the transaction value for any UPI payment above the ₹2,000 threshold. Importantly, the fee was designed to be borne by the merchant, not the customer. This means that for every qualifying transaction, the shopkeeper would have had to pay a small fraction of the amount to the payment infrastructure, while the buyer would see no change in the price they pay.
4% of the transaction value for any UPI payment above the ₹2,000 threshold.
Trader associations had been vocal about their preference to see the MDR rollout postponed until after the festival. When NPCI announced the delay, these groups framed the move as a "Diwali gift" to traders, expressing relief that they could focus on serving customers without worrying about an extra fee during the celebrations.
The postponement does not cancel the MDR; it merely shifts its start date to a time after Diwali, with the precise schedule still to be announced. The postponement provides additional time before the MDR is implemented, allowing merchants to continue operating under the existing cost structure until a later date is announced. For the payments ecosystem, this means that the infrastructure will continue to process UPI transactions as before, while merchants retain the current cost structure through the holiday window.
As of the announcement, the National Payments Corporation of India maintains a neutral stance on the matter, presenting the decision as a procedural response to merchant feedback. Traders, meanwhile, have expressed support for the postponement, viewing it as a timely relief that aligns with their operational needs during the festive period. The payments landscape now waits for the next communication from NPCI, which will set the new effective date for the MDR and clarify how the fee will be applied once the Diwali season has passed.