Published: October 14, 2026 • Category: Indian Tech • Fintech and Payments • By Mahesh

MUMBAI: The National Payments Corporation of India on Tuesday, October 13, deferred the merchant discount rate (MDR) on select person-to-merchant UPI payments until immediately after Diwali, two days before the charge was due to start on October 15.^[3][4] The UPI and Services Steering Committee said it took the decision with the festive season in mind and will notify the exact date separately.^[3] Shares of Paytm parent One 97 Communications fell as much as 7% on the day before recovering part of the loss.^[6]

What NPCI Decided and What Stays the Same

NPCI's statement said the MDR will be implemented "immediately post Diwali" at a date still to be notified.^[3] The charge was approved on September 15, when the UPI Steering Committee set an MDR of 0.4% on eligible merchant payments above Rs 2,000. The Finance Ministry said customers would not be charged directly.^[7]

On October 8, Moneycontrol reported that merchant bodies, fintechs and payment companies had asked NPCI to move the start to January 2027, citing confusion over varying MDR rates and where they apply.^[8] Revoi reported that talk of a January 1 start had circulated, but the statement points to a date shortly after Diwali. Reports say the MDR structure itself has not changed.^[4]

How the MDR Framework Works

Source: NPCI statement as reported by ANI and Chronicle India.^[3][11]

The fee is paid by the merchant to the bank and payment processor. The government has said it is neither a tax nor a charge collected by NPCI or the state.^[3] As an illustration, a Rs 10,000 payment would carry a Rs 40 fee at 0.4% and Rs 5 in an essential category, on Depth Grid's calculation. The government says transactions up to Rs 2,000 make up more than 96% of UPI merchant volume, so most payments sit below the threshold.^[10] UPI's average ticket was about Rs 1,220 in September, from 24.07 billion transactions worth Rs 29.37 lakh crore, which is also a Depth Grid calculation.^[10]

How the Fee Got Here

Retail traders' associations had also called for a "No UPI Day" on October 2 to protest the fee but withdrew the call after meeting Finance Minister Nirmala Sitharaman.^[4]

Market Reaction and the Revenue Pool

When the framework was announced, Citi estimated an incremental ecosystem revenue pool of about Rs 16,000 crore to Rs 17,000 crore a year. Analysts named Paytm, Pine Labs, MobiKwik and YES Bank among potential beneficiaries.^[7] Against September's UPI value annualised at roughly Rs 352 lakh crore, a Rs 16,500 crore pool is about 5 basis points, on Depth Grid's calculation. That figure includes free person-to-person transfers in the denominator, so it understates the rate on affected merchant payments.

On October 13, One 97 Communications fell as much as 7%, Pine Labs 4.8% and One MobiKwik Systems 4% before rebounding in part.^[6] Shares of the three companies had fallen by up to about 7% on October 8 when reports of a possible delay surfaced.^[8][9] They had risen after the September announcement, which shows how closely these stocks track MDR headlines.^[7] Depth Grid has not verified closing prices on the NSE or BSE. The moves cited are intraday.

Strategic Implications for Merchants, Fintechs and Banks

For merchants above the Rs 1 lakh monthly threshold, the deferral gives a few more weeks to adjust pricing and billing before the fee starts. For payment companies and banks, the revenue is delayed rather than removed if the structure stays as reported, but the repeated shifts in timing add uncertainty to near-term earnings estimates.

The user base the fee sits on is large and still growing. UPI processed 24.07 billion transactions in September 2026, up 23% from a year earlier. Daily volume crossed 800 million for the first time.^[10] For background on the sector, see Depth Grid's report on how technology is rewiring banking and payments in 2026. Funding context is in our analysis of startup funding in India, the USA and Europe and our report on Q3 global venture funding.

Three items to watch are the date NPCI notifies, any change to the 0.4% rate or the Rs 2,000 threshold and the next quarterly results from listed payment companies. The Reserve Bank of India and NPCI circulars remain the final word on rates and timing.

Common Questions and Direct Answers

What did NPCI decide on UPI MDR on October 13, 2026?

NPCI's UPI and Services Steering Committee deferred the merchant discount rate on select person-to-merchant UPI payments until immediately after Diwali, at a date to be notified separately. The charge was due to start on October 15. NPCI cited the festive season. Reports say the MDR structure itself is unchanged.

How much is the UPI MDR and who pays it?

The framework sets an MDR of 0.4% on select merchant payments above Rs 2,000 and a flat Rs 5 for specified essential sectors such as railways, telecom, insurance, fuel, utilities and education. The merchant bears the fee. The Finance Ministry has said customers will not be charged directly. The fee is not a tax.

Which UPI payments stay free after the MDR starts?

Person-to-person UPI transfers stay free at any amount. Merchant payments up to Rs 2,000 stay at zero MDR. Small merchants collecting up to Rs 1 lakh a month through existing QR codes also remain under the zero-MDR framework. The government says over 96% of UPI merchant volume is in transactions up to Rs 2,000.

Why did Paytm, Pine Labs and MobiKwik shares fall on the deferral?

These companies were seen as potential beneficiaries of merchant fees, so a delay pushes back expected revenue. On October 13 Paytm parent One 97 Communications fell as much as 7%, Pine Labs 4.8% and MobiKwik 4% before partly recovering. Depth Grid has not verified closing prices. The figures are intraday moves.

When will the UPI MDR start now?

NPCI has not named a date. Its statement says the MDR will be implemented immediately after Diwali at a date to be notified separately. Earlier reports had said industry bodies asked for a start in January 2027, but NPCI's wording points to a much earlier rollout. Watch for a fresh circular from NPCI.

Primary Sources and Regulatory Filings

1. National Payments Corporation of India: circulars, statements and UPI product data
2. Ministry of Finance: official statements on UPI charges
3. ANI: NPCI defers MDR on select UPI merchant transactions post Diwali
4. Revoi: UPI MDR rollout deferred, new date after Diwali
5. Analytics Insight: what merchants should know about the deferral
6. HDFC Sky: Paytm, Pine Labs and MobiKwik shares fall and rebound on the deferral
7. Upstox: 0.4% MDR introduced in September 2026 and the Citi revenue estimate
8. TradingView (Moneycontrol): shares fall on the October 8 deferral report
9. Free Press Journal: fintech shares fall amid MDR rollout uncertainty
10. StartupTalky: UPI transactions in September 2026
11. Chronicle India: UPI September 2026 volume and the new MDR framework
12. All India Radio: Finance Ministry statement on UPI MDR, June 2025
13. The Tribune (ANI): Finance Ministry dismisses MDR speculation and the PCI proposal

By Mahesh | Depth Grid News Desk | depthgrid.in