Charges may be imposed on UPI payments from tomorrow:New rules had been put on hold due to festive season

Today is Bhai Dooj, marking the end of the festive season. All eyes are now on the new UPI rules. From tomorrow, shopkeepers may have to pay a 0.4% merchant discount rate (MDR), or charge, on accepting more than ₹2,000 through UPI. NPCI had initially planned to implement these new charges from 15 October, but deferred them because of the festivals. NPCI had said they would be introduced immediately after Diwali, although the date has not yet been announced. Three key points about the government’s MDR proposal: Understand how much money will be deducted with an example Why was the decision postponed until Diwali? During Diwali, there are heavy sales of clothes, electronics, jewellery and other goods in markets across the country. As a result, digital payments increase. Business organisations and payment companies believed that implementing the new rule during the festive season could disrupt payments at shops. Keeping this in mind, NPCI has postponed the decision until Diwali. Traders protested across the country Traders across the country and opposition leaders had opposed the government’s decision. The protest took place on two levels. Opposition leaders raised questions about its political implications and impact on the public, while business organisations expressed concern that it would increase costs and place an additional burden on customers. They said small traders would suffer the most as a result. What is the Merchant Discount Rate? The Merchant Discount Rate, or MDR, is the fee that a merchant or shopkeeper pays to banks and payment service providers for using debit/credit cards or digital payment (UPI) facilities through a point-of-sale machine or payment gateway. This fee is charged to cover the cost of operating digital infrastructure and transfer networks. The merchant, not the customer, has to pay this charge. Less than 5% of merchant transactions above ₹2,000 Payments above ₹2,000 account for less than 5% of the total UPI payments made to merchants in terms of volume. However, their share is much higher in terms of value. These large payments account for around 67% of the total money. This amounts to around ₹6 lakh crore every month. This is approximately 20% of the total value of UPI transactions across the country. In other words, although large transactions are small in number, they account for a significant share of the money circulating in the market. Impact of UPI MDR Charges on Merchants Government launched UPI incentive scheme in 2021 The government launched the incentive scheme in 2021-22 to promote UPI and keep it free. Under the scheme, a 0.15% incentive was provided on UPI payments of up to ₹2,000 made by customers to small merchants. An incentive of ₹8,276 crore was provided under the scheme until 2024-25. As of June 2026, there were around 55.5 crore UPI users in the country.