The UPI MDR question is back on the table. On 13 October 2026, NPCI’s UPI and Services Steering Committee approved Merchant Discount Rate (MDR) for UPI. It will apply to select Person-to-Merchant (P2M) UPI transactions. The change will take effect immediately after Diwali. NPCI will notify the exact date separately. The committee deliberately held back the rollout during the festive season.
What NPCI announced on UPI MDR
NPCI issued a press release from Mumbai on 13 October 2026. The key facts are as follows. The UPI and Services Steering Committee took the decision. It covers MDR on select P2M UPI transactions only. Implementation begins immediately post-Diwali. However, NPCI will notify the exact date and MDR rates separately.
What is MDR and why this matters
MDR is the fee that applies to digital transactions. Merchants usually bear this cost. UPI has been free for merchants since its launch. That zero-fee model powered its massive adoption across India. Introducing MDR on select merchant transactions marks a significant shift in the digital payments landscape. For CAs and finance professionals, this matters. As a result, merchant clients will need to factor MDR into cost structures. They must revisit pricing and payment acceptance strategies. They should also consider the tax treatment of MDR as a business expense.
What is still unknown
NPCI has not yet specified which merchant categories count as "select". It has not revealed the MDR rate structure. It is unclear whether small merchants get exemptions. The exact implementation date is also unknown. Expect the detailed notification after Diwali.
What merchants should do now
Implementation is coming right after Diwali. Therefore, merchants should review their UPI transaction volumes now. They should watch for NPCI’s detailed notification. They should also consult their CA on the cost implications for their business.
Tackle MDR charges with Rakam
Here is something practical for merchants. Rakam (upi.studyfromnotes.com), our free fixed-amount UPI QR generator developed by CA Anshul Karwa, is built exactly for situations like this.
Rakam lets merchants generate fixed-amount UPI QR codes, so the customer pays the precise total every time. It also has a split option for dividing payments, and you can add 0.4 percent (or your applicable MDR rate) on top of the bill amount. That way the MDR cost is factored into what you collect instead of eating into your margin.
Try it free at upi.studyfromnotes.com, or download the Rakam app from the Google Play Store (link: https://play.google.com/store/apps/details?id=com.rakam.fixedupiqr).
Share this update: If you advise merchant clients on digital payments, forward this post. Expect the detailed MDR notification soon after Diwali.
CA L Awrak is a Chartered Accountant writing on CA exams, tax and finance careers.
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