The UPI merchant fee delayed until after Diwali will no longer take effect on October 15, 2026. The proposed 0.4% charge remains unchanged, but its rollout has been postponed.
On October 13, the National Payments Corporation of India (NPCI) announced that selected merchant payments above ₹2,000 would attract Merchant Discount Rate (MDR) only after Diwali. The exact implementation date remains unannounced. Customers will continue making UPI payments without transaction charges.
Key Highlights
- NPCI postponed the October 15 MDR rollout until after Diwali.
- Eligible merchant payments above ₹2,000 may attract 0.4% MDR.
- The maximum standard fee remains ₹300 per transaction.
- Around 96% of merchant transactions will remain exempt.
- Personal UPI transfers and eligible small-merchant payments remain free.
Why Did NPCI Postpone The UPI Merchant Fee Until After Diwali?
The proposed fee was approaching its October 15 deadline when retailers raised concerns about introducing new payment costs during festive shopping.
NPCI’s UPI and Services Steering Committee subsequently deferred implementation on October 13.
The dispute had already prompted merchant organisations to consider a nationwide ‘No UPI Day’ on October 2. The protest was withdrawn following discussions with Finance Minister Nirmala Sitharaman in September.
The timeline explains how the decision developed:
- September 15: The Finance Ministry announced the revised MDR framework.
- September 30: Trade representatives met the Finance Minister over the proposed charges.
- October 13: NPCI confirmed the festive-season postponement.
- October 15: The original implementation date was withdrawn.
NPCI shared the announcement through its official X account.
NPCI’s Official X Post October 13, 2026: UPI MDR on Select Merchant Transactions Shall be Implemented Post DiwaliNPCI’s Official X Post, October 13, 2026: UPI MDR on Select Merchant Transactions Shall be Implemented Post Diwali
The government’s Akashvani News report also confirmed the decision.
How Much Is the Proposed 0.4% UPI Charge On Payments Above ₹2,000?
The fee is called the Merchant Discount Rate, or MDR. Businesses pay it to payment-processing participants, including banks and payment providers.
Under the Finance Ministry’s September 15 framework, the standard rate is 0.4% of an eligible merchant payment exceeding ₹2,000.
Consider a clothing retailer receiving different UPI payments. The proposed charges would work as follows:
| UPI Payment | Proposed Merchant MDR |
| ₹2,000 | ₹0 |
| ₹5,000 | ₹20 |
| ₹10,000 | ₹40 |
| ₹50,000 | ₹200 |
| ₹75,000 | ₹300 |
| ₹1,00,000 | ₹300 (capped) |
These are illustrative charges under the postponed framework, not fees currently being collected.
The threshold also deserves attention. For an eligible ₹5,000 payment, the 0.4% rate applies to the entire ₹5,000, not merely the ₹3,000 exceeding the exemption limit.
Will UPI Users And Small Shopkeepers Have To Pay Extra Charges?
Someone paying ₹10,000 for an appliance through Google Pay, PhonePe or another UPI application will not be charged MDR under the proposed framework.
The Finance Ministry has advised banks to prevent merchants from passing MDR costs to customers. UPI application providers are also prohibited from imposing hidden platform charges.
Several payment categories receive specific protection:
- Personal transfers: Sending money to friends or family remains free, regardless of the amount.
- Small merchants: Eligible P2PM QR-code merchants receiving up to ₹1 lakh monthly retain zero MDR.
- Essential sectors: Railways, telecom, insurance, fuel and agricultural-input transactions above ₹2,000 attract a proposed flat ₹5 merchant fee.
- Capital markets: Specified securities and mutual-fund payments attract 0.02% MDR, capped at ₹300.
The government estimates that only about 4% of merchant transactions would fall within the charging framework.
What Happens To UPI Payments After Diwali 2026?
Diwali falls on November 8, 2026, but NPCI has not announced a replacement implementation date. Earlier reports suggesting January 2027 should not be treated as official confirmation.
The financial implications extend beyond retailers.
According to NPCI’s September 2026 statistics, UPI processed 24.07 billion transactions worth approximately ₹29.37 lakh crore. That represents an average of roughly 802 million daily transactions.
Banks and payment companies want MDR revenue to support infrastructure and operating costs. Retailers, meanwhile, have raised concerns about reduced margins and additional payment expenses. The postponement gives both groups additional preparation time without changing the announced fee structure. Merchants should await the updated NPCI circular before making changes to payment arrangements.
When Will the 0.4% UPI Merchant Fee Start?
NPCI plans to introduce the charge after Diwali 2026. However, no specific date has been notified, and October 15 is no longer the implementation deadline.
Is UPI Free For Transactions Above ₹2,000?
Yes, customers can continue paying through UPI without MDR. Once implemented, eligible merchants accepting payments above ₹2,000 will bear the applicable transaction-processing charge.
Will Google Pay And PhonePe Start Charging Customers?
No. The proposed MDR applies within the merchant payment system. UPI application providers cannot impose an additional platform fee on customers under this framework.
Will Kirana Shops Have To Pay The New MDR?
Eligible small merchants receiving up to ₹1 lakh monthly through P2PM QR payments remain exempt. Other businesses must follow the applicable merchant classification and transaction thresholds.
Has The Government Cancelled The Proposed UPI Fee Permanently?
No. NPCI has postponed implementation, not cancelled the policy. The 0.4% structure remains proposed, with the revised commencement date still awaiting an official notification.
For further developments on UPI charges, digital banking rules, and merchant payment policies, follow India Focus Daily for updates based on official announcements.
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