NPCI defers 0.4% UPI merchant fee to after Diwali, two days before rollout

The National Payments Corporation of India (NPCI) on Tuesday, October 13, 2026, deferred the implementation of a 0.4% merchant discount rate (MDR) on select UPI transactions above ₹2,000 — just two days before the scheduled October 15 rollout.

"The UPI and Services Steering Committee today decided that, keeping in mind the festive season, the Merchant Discount Rate (MDR) on select Person-to-Merchant (P2M) UPI transactions shall be implemented immediately post-Diwali, on a date to be notified separately," NPCI said in a statement.

A circular issued by NPCI last month had set the MDR at 0.4% on select P2M payments above ₹2,000 made through UPI apps such as Paytm, PhonePe and BHIM, with implementation scheduled for October 15. NPCI had clarified that merchants, not consumers, would pay the fee, and the levy was capped at ₹300 for transactions of ₹75,000 or more.

Person-to-person payments were to remain free. For essential services such as railways, telecom, fuel and insurance, the MDR was capped at a flat ₹5 per transaction above ₹2,000 — with NPCI issuing FAQs to reassure petrol pump dealers that fuel purchases under ₹2,000 carry zero MDR.

The decision drew sharp criticism from trade bodies and opposition parties, which called it a tax and warned it could push people back towards cash. The India SME Forum welcomed the deferment as "wise and timely". Its survey of 7,497 enterprises found 97% said UPI had helped increase sales or prevent customer loss and 93% reported cash-flow improvements — but 48% said they would add the proposed charges to product prices and 32% would encourage customers to pay cash.