UPI MDR Rollout May Be Deferred to January 2027 as Paytm, MobiKwik and Pine Labs Shares Fall

The proposed Merchant Discount Rate (MDR) on UPI transactions may not be implemented on October 15 as originally planned. The National Payments Corporation of India (NPCI) and the UPI Steering Committee are considering pushing the rollout to January 1, 2027, according to reports citing people familiar with the discussions.

The possible postponement comes just as India enters its crucial festive shopping season, when digital payments typically experience a significant increase in transaction volumes.

A final decision has not yet been announced by NPCI, with discussions continuing with the Finance Ministry and industry stakeholders.

The proposed UPI MDR framework has faced concerns from merchant associations, fintech companies and payment firms, particularly over different rates and uncertainty about how the charges would apply to various types of transactions.

Under the proposed framework, a 0.4% MDR would apply to eligible person-to-merchant UPI transactions above ₹2,000, with the charge paid by merchants rather than consumers. The proposed fee was scheduled to take effect from October 15, 2026.

Industry participants have requested additional time to prepare their systems and resolve operational and classification-related issues.

The potential delay would effectively keep the existing zero-MDR environment for merchants through the festive season, potentially reducing concerns about higher payment costs during one of India's busiest retail periods.

Importantly, the proposed MDR is not intended to be a direct fee charged to UPI users.

The government has clarified that UPI will remain free for person-to-person transactions, while payments to merchants up to ₹2,000 and transactions covered by the zero-MDR framework for small merchants will also remain free. The government estimates that around 96% of P2M transactions will remain unaffected.

The MDR is a fee paid within the payments ecosystem for processing eligible merchant transactions.

Reports of the potential UPI MDR delay immediately affected payment-sector stocks.

Shares of Paytm parent One 97 Communications, One MobiKwik Systems and Pine Labs fell sharply during Thursday's trading session.

Moneycontrol reported that MobiKwik shares declined around 6.7%, while Paytm and Pine Labs also came under pressure. The market reaction reflects investor expectations that postponing MDR implementation could delay a potential new revenue stream for companies operating in India's digital payments ecosystem.

Reuters reported similar declines, with Paytm, MobiKwik and Pine Labs falling after reports emerged that the government was considering postponing the fee rollout.

The proposed UPI MDR deferral to January 2027 is still under discussion, meaning October 15 remains the scheduled implementation date unless NPCI formally announces a change.

For merchants, a postponement would provide additional breathing room during the festive season. For payment companies and investors, however, the delay could mean waiting longer for the financial benefits expected from the new UPI monetisation framework.

With UPI handling hundreds of millions of transactions every day, the final MDR decision could have significant implications for Indian digital payments, fintech companies, merchants and the broader UPI ecosystem.