NPCI Defers 0.4% UPI Merchant Fee Until After Diwali; Payments Stay Free for Customers

The National Payments Corporation of India (NPCI) has put off a planned 0.4% merchant discount rate (MDR) on larger UPI payments to merchants, which was due to start on 15 October 2026. Announcing the deferral on 13 October, NPCI cited the festive season and said a new start date would be announced separately.

Nothing changes for customers. Person-to-person UPI transfers stay free whatever the amount, and the proposed fee was always meant to be paid by merchants, who are not allowed to pass it on.

What was planned

Under the framework NPCI set out in September, merchants would pay 0.4% on eligible person-to-merchant payments above ₹2,000, capped at ₹300 per transaction for payments of ₹75,000 and above. Payments of up to ₹2,000 stay free. In practice:

• A ₹2,000 payment: no fee
• A ₹3,000 payment: ₹12
• A ₹50,000 payment: ₹200
• ₹75,000 and above: ₹300

Some categories get lower rates. Railways, telecom, insurance, fuel and agricultural inputs would pay a flat ₹5 per transaction above ₹2,000, while mutual fund, securities and broker payments would pay 0.02%, capped at ₹300. Small merchants who receive up to ₹1 lakh a month through UPI QR codes would pay nothing, and credit-linked UPI payments fall outside the framework. The levy would apply to about 4% of merchant transactions.

Why UPI is getting a fee at all

MDR on UPI has been zero since January 2020, when the government amended the Payments and Settlement Systems Act and the Income-tax Act. Revenue from the new fee would be shared among banks, payment apps and other participants to pay for infrastructure, cybersecurity and innovation. The finance ministry has said the MDR is neither a tax nor a charge collected by the government or NPCI.

Earlier reports suggested the rollout could slip to January 2027, but NPCI has not confirmed a date.