NPCI has deferred the proposed MDR implementation on selected UPI merchant transactions until after Diwali 2026. The new effective date has not been announced. The original article below remains accurate for when the framework eventually takes effect. UPI AutoPay recurring mandates remain excluded from MDR regardless of when implementation occurs.
UPI MDR 2026 Postponed:
NPCI Defers New Date After Diwali
NPCI and RBI proposed a new UPI Merchant Discount Rate (MDR) framework, originally set to take effect October 15, 2026. That implementation has been deferred to after Diwali 2026, with no new effective date announced. For schools, coaching institutes, and colleges collecting fees via UPI payment links, this is a material change — and the AutoPay exemption still applies whenever it does take effect.
The Proposed UPI MDR Framework (Implementation Deferred)
Since 2020, UPI P2M (person-to-merchant) transactions carried zero MDR — the government had waived it to drive UPI adoption. NPCI proposed ending that waiver for transactions above ₹2,000, but deferred the October 15, 2026 implementation date to after Diwali. No new date has been confirmed.
Under the new framework:
- UPI P2M payments below ₹2,000 remain zero MDR
- UPI P2M payments above ₹2,000 attract MDR at rates set per merchant category
- UPI AutoPay recurring mandates are excluded entirely from the new MDR
- Certain categories (education, utilities, government) receive designated flat/capped treatment, not the general merchant rate
The exact MDR rate for education category institutions is set by NPCI and your acquiring bank. It is not necessarily the same as the general 0.4% P2M rate. Verify with your payment gateway (Razorpay, Cashfree, PhonePe Business, PayU, CCAvenue) what rate applies to your institution before October 15.
How Education Institutions Are Treated
Education is explicitly designated as a special merchant category under the new UPI MDR framework. This means:
A school or college collecting school fees is not treated the same as a general retailer. Education institutions receive a flat/capped MDR rate, not the standard variable rate.
Each payment gateway (Razorpay, Cashfree, PhonePe Business, etc.) implements the rate differently for the education category. Some may absorb a portion. The exact deduction per transaction depends on your gateway agreement.
Don't rely on a blanket "0.4% for all merchants above ₹2,000" calculation for your school fees. Contact your gateway before October 15 to confirm the exact rate applicable to your institution.
Why UPI AutoPay Mandates Remain MDR-Free
UPI AutoPay recurring mandates — where a parent approves a standing instruction and fees are debited automatically on the due date — are excluded from the new MDR framework. This exemption applies regardless of amount or merchant category.
Parent receives a WhatsApp/SMS payment link each time. Parent clicks and pays. Each payment above ₹2,000 is subject to MDR under the new framework. The merchant (school/coaching) bears the MDR cost.
Parent approves a standing mandate once. Fees auto-debit on the due date every month. The recurring mandate debit is excluded from the new MDR framework — no MDR cost to the school regardless of amount.
Impact on School and Coaching Fee Collection
The MDR impact depends on how your institution currently collects fees:
3 Actions to Take While Waiting for the New Date
Contact Razorpay, Cashfree, PhonePe Business, PayU, or CCAvenue — whichever gateway you use — and ask for the latest on UPI MDR implementation for your institution. Education category institutions typically get a different (lower) rate than general merchants. Get the applicable rate confirmed in writing once an effective date is set.
AutoPay mandates are excluded from MDR regardless of when implementation occurs. Migrating now means you are protected from day one — no scramble when the new date is announced. FastFee can set up UPI AutoPay mandates via PhonePe for your entire student base.
Bank transfers (NEFT/RTGS/IMPS) carry no MDR. For high-value annual fees (₹20,000–₹1,00,000+), offering parents the option to pay via bank transfer avoids MDR entirely. This does add reconciliation overhead — FastFee's auto-reconciliation handles unmatched NEFT payments automatically.
FAQ
Will schools and colleges have to pay UPI MDR — has it been postponed?
NPCI deferred the proposed UPI MDR implementation until after Diwali 2026. No new effective date has been announced as of October 15, 2026. When it does take effect, education institutions are a designated category that may receive flat/capped treatment rather than the general merchant rate. UPI AutoPay mandates remain excluded from MDR regardless.
Are UPI AutoPay mandates for school fees subject to the new MDR?
No. UPI AutoPay recurring mandates are explicitly excluded from the new P2M MDR framework. Schools and coaching institutes collecting monthly fees via AutoPay mandates will not be charged MDR on those collections.
What is the MDR rate for education institutions under the new framework?
Education is a designated category — verify the exact rate directly with your payment gateway before October 15. Do not assume the general 0.4% P2M rate applies to your institution.
What should schools do now that the MDR implementation is postponed?
NPCI deferred the October 15 date — no new date is announced. (1) Stay updated via your payment gateway. (2) Migrate monthly fee collection to UPI AutoPay mandates now — mandates are excluded from MDR regardless of when implementation happens. (3) For large one-time fees, NEFT bank transfer carries no MDR.
Does this apply to coaching institutes and colleges too?
Yes. Education category designation typically covers K-12 schools, colleges, universities, and coaching institutes. Verify with your specific gateway that your institution qualifies for the education category designation.
Avoid MDR entirely — switch to UPI AutoPay mandates
FastFee sets up UPI AutoPay mandates for your entire student base. Monthly fees auto-debit on the due date — no payment links, no MDR, no follow-up calls.
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