The National Payments Corporation of India has postponed the planned introduction of a merchant fee on selected Unified Payments Interface transactions until after Diwali. The UPI merchant fee postponement moves the rollout beyond its original October 15 start date, while NPCI prepares to announce a fresh implementation date.
The proposed Merchant Discount Rate is 0.4% on eligible bank-account-to-merchant UPI payments above ₹2,000. It is a charge paid within the merchant-payment system, not a blanket fee on every UPI transfer. Person-to-person payments and merchant payments of ₹2,000 or less are not covered by the proposed levy.
UPI merchant fee postponed beyond Diwali
NPCI said the deferral was made “keeping in mind the festive season.” Diwali falls on November 8 in 2026 and represents one of India’s largest annual shopping periods, with strong sales across retail, e-commerce, vehicles, electronics, clothing and household goods.
The UPI and Services Steering Committee decided on October 13 that the levy would be implemented immediately after Diwali on a date to be notified separately. The decision changes the timing of the framework rather than cancelling it.
The Confederation of All India Traders welcomed the delay, describing it as timely and pragmatic. Trade representatives had raised concerns that introducing a new payment cost immediately before the festive sales peak could create operational problems and add pressure on retailers.
Who would pay the proposed UPI MDR?
Under the proposed structure, a 40-basis-point MDR would apply to eligible person-to-merchant transactions above ₹2,000. A merchant receiving a qualifying ₹5,000 payment would therefore face a ₹20 charge before any applicable tax or contractual adjustments.
The charge is designed for merchants and payment-system participants, not for ordinary person-to-person transfers such as sending money to friends or family. The Economic Times reported that more than 95% of UPI merchant transactions by volume are expected to remain free because they fall below the threshold or belong to exempt categories.
Earlier reporting said the charge would be capped at ₹300 per qualifying transaction. Certain merchant and public-service categories may have different rates or exemptions, but businesses should wait for NPCI’s final operational circular before changing prices, payment options or customer notices.
Why India is changing UPI’s pricing model
Bank-account-based UPI merchant payments have operated under a zero-MDR framework for more than six years. The government has instead supported banks and payment companies through incentive programmes for low-value UPI and RuPay debit-card transactions.
Payment firms argue that expanding transaction volumes require continued investment in servers, fraud prevention, dispute handling, security and new products. NPCI chief executive Dilip Asbe has estimated that the wider UPI ecosystem costs about ₹21,000 crore annually to operate.
The proposed MDR would distribute revenue among issuing banks, acquiring banks, payment-service providers and consumer-facing applications. Supporters say that could make the system more financially sustainable, while retailers remain concerned that additional costs may eventually affect margins or prices.
What users and merchants should do now
UPI users do not need to take any action before the revised implementation date is announced. The postponement means the planned October 15 rollout will not proceed as scheduled.
Merchants should continue monitoring official NPCI and banking communications, particularly for the final date, eligible categories, exemptions, settlement rules and whether their payment provider changes commercial terms. Businesses should not describe the proposal as a universal consumer charge: the confirmed framework concerns selected merchant transactions, while personal transfers and most low-value payments remain outside it.
