UPI merchant charges that were due to begin on October 15 have been deferred until after Diwali, giving merchants and payment service providers additional time to prepare for the proposed changes during the festive shopping period.
The National Payments Corporation of India announced the decision on October 13 following a meeting of its UPI and Services Steering Committee. The organisation said the festive season had been considered while deciding the implementation timeline. A new date is to be notified separately.
Editorial Insight
Key Highlights
Important points readers should notice.
Issue/Event: NPCI postpones the implementation of MDR charges on select merchant UPI transactions
Location: India.
Authority/Organisation: National Payments Corporation of India (NPCI), through its UPI and Services Steering Committee.
Action Taken: On October 13, NPCI deferred the planned October 15 rollout until after Diwali; a revised date will be notified separately.
Impact: Merchants and payment providers receive additional preparation time. The delay does not mean the proposed framework has been cancelled, and the charges do not apply indiscriminately to every UPI transfer.
The proposed framework concerns Merchant Discount Rate charges on specified person-to-merchant (P2M) UPI transactions. MDR is a fee associated with accepting a digital payment, generally paid by the merchant-side payment ecosystem. It is distinct from a tax collected by the government.
What was supposed to change on October 15?
Under the previously announced framework, an MDR of 0.4% was proposed for eligible merchant UPI transactions above ₹2,000, subject to applicable caps, categories and exemptions. The framework also contained different treatment for specified types of transactions and eligible small merchants.
Editorial Analysis
Why This Matters
Digital payments are central to everyday shopping and small-business transactions. Clear information about merchant charges can prevent unnecessary confusion, incorrect customer claims and premature changes to shop pricing. The main distinction is between a delay in implementation and a cancellation of the policy. Customers should understand the difference between person-to-person transfers and eligible merchant payments, while businesses should wait for the final operational instructions.
For illustration, a 0.4% merchant fee on an eligible ₹5,000 payment would equal ₹20 before considering the final operational rules. This is an illustration of the proposed rate, not confirmation that every ₹5,000 UPI payment will incur that fee.
The planned October 15 start date has now been postponed. Merchants should not treat that date as the point when the new charges automatically begin. They should wait for NPCI's revised implementation notice and applicable instructions from their acquiring bank or payment provider.
Will ordinary UPI users have to pay more?
The distinction between a customer making a payment and a merchant accepting it is central to understanding the change.
The proposed MDR framework relates to specified merchant transactions. It is not a blanket fee on every transfer made through UPI. Person-to-person transfers, such as sending money to a family member, are treated differently from payments made to a shop or business.
The framework announced earlier also provided exemptions for certain transactions and eligible small merchants. The precise treatment depends on the transaction category and applicable rules.
Customers should therefore not assume that sending ₹2,500 to a friend will attract the same treatment as paying ₹2,500 to a participating merchant. Nor should they assume that every merchant payment above ₹2,000 will necessarily carry a fee: the applicable transaction category and exemptions matter.
Why was the rollout delayed?
The postponement comes just before the previously planned implementation date and during a period when retailers expect higher transaction volumes.
Diwali shopping can bring increased payments for clothing, electronics, groceries, gifts, food, travel and other purchases. A change to merchant payment costs at this time could require businesses and payment providers to update systems, communicate with customers and review their pricing and accounting processes.
Deferring the rollout gives participants more time to prepare. It also avoids introducing the new framework immediately before a major shopping period.
However, the postponement does not establish that the proposed framework has been withdrawn. NPCI has said implementation will take place after Diwali, with the date to be notified separately.
What should shopkeepers do now?
Merchants who accept UPI payments should continue following the arrangements currently applicable to their accounts and payment providers. They should not change displayed prices or introduce a separate fee merely because the proposed MDR framework has been announced.
Businesses should review communications from their acquiring banks and payment service providers, confirm which transaction categories would be covered under the final framework, and check how any applicable charges will be calculated and reported.
Small merchants should pay particular attention to the eligibility conditions attached to any exemption rather than assuming that all small businesses qualify automatically.
What happens next?
NPCI is expected to notify a revised implementation date after Diwali. Merchants, banks, payment service providers and businesses will need to assess the final instructions before making operational changes.
Until that notice is issued, the key confirmed development is the postponement of the planned rollout. The final timing and application of charges should be assessed against the applicable NPCI framework rather than social media claims or generalised descriptions of a UPI fee.
