UPI MDR Rollout Deferred Beyond 15 October; SIP AutoPay Exemption Remains Part of Proposed Framework

Key Takeaways

• The proposed merchant discount rate on eligible UPI transactions was scheduled to take effect on 15 October 2026 but has been deferred.
• NPCI's previously published clarification excludes recurring UPI AutoPay mandates, including mutual fund SIP payments, from the prescribed MDR.
• The proposed fee concerns eligible merchant transactions rather than a direct charge imposed on consumers making UPI payments.

UPI Merchant Fee Implementation Postponed

The planned introduction of merchant discount rate charges on certain Unified Payments Interface transactions has been postponed beyond 15 October 2026.

Reports published on 14 October indicated that the National Payments Corporation of India (NPCI) had deferred the proposed implementation until after Diwali. A revised commencement date had not been confirmed at the time of reporting.

The original framework was intended to introduce merchant charges on eligible person-to-merchant transactions exceeding ₹2,000.

The postponement changes the implementation timeline but does not, by itself, establish that the proposed framework has been withdrawn.

What Was Proposed Under the MDR Framework?

Merchant discount rate, or MDR, is a payment-processing charge associated with transactions accepted by merchants.

Under the proposed framework, eligible higher-value UPI merchant transactions were to attract an MDR of 0.4%, subject to the applicable conditions and limits.

Importantly, MDR is a merchant-side charge. It should not be described as an automatic additional fee payable by every consumer making a UPI transaction.

Earlier guidance also distinguished between ordinary merchant payments and recurring payment mandates.

Treatment of Mutual Fund SIP AutoPay Transactions

For mutual fund investors, the main distinction concerns systematic investment plan payments made through UPI AutoPay.

NPCI's September clarification stated that recurring UPI AutoPay mandates were excluded from the prescribed MDR framework.

The exemption covered recurring transactions such as mutual fund SIP contributions, insurance premiums, utility payments and other eligible automated mandates.

Business Standard's September reporting also explained that the proposed merchant fee should not be confused with a charge imposed directly on investors for making their monthly SIP contributions.

What Changes After the Deferral?

The scheduled 15 October rollout has not proceeded as originally proposed.

As a result, the earlier implementation date should not be used to suggest that new merchant charges have already become operational.

The separate treatment of recurring UPI AutoPay transactions remains an important part of the previously communicated framework.

Any subsequent changes to the exemption, merchant eligibility rules or commencement date would require confirmation from NPCI or another competent authority.

For mutual fund transactions, the immediate factual position is that the proposed MDR implementation has been postponed, while the previously announced SIP AutoPay exemption has not been reported as withdrawn.