NPCI Defers 0.4% UPI Merchant Charge Until After Diwali, With No New Date
NPCI has deferred the 0.4% charge on select UPI payments above ₹2,000 that was due on 15 October. Merchants pay it, and no new start date is set.
The National Payments Corporation of India (NPCI) has put off a charge on some UPI merchant payments. On 13 October 2026, its UPI and Services Steering Committee deferred the 0.4% merchant discount rate (MDR) on select person-to-merchant payments above ₹2,000. The charge had been due to start on 15 October.
The start has now moved to after Diwali, and no date has been set. The charge falls on merchants rather than customers.
NPCI first announced the charge on 15 September 2026, according to DT Next and SCC Online. The October decision moved the start date. The rate, the ₹2,000 threshold and the ₹300 cap were already in the rules, as SCC Online reported in September.
NPCI's stated reason for the charge is cost. Entrepreneur reports that NPCI puts the yearly cost of UPI payment operations, server bandwidth, fraud prevention and bank technical support at about ₹20,000 crore, and says a commercial, threshold-based model would give more reliable funding than relying solely on budget allocations.
Who Pays the 0.4% Charge
A merchant discount rate is a fee on the merchant's side of a payment. dtnext reports that merchants, not consumers, bear the charge. SCC Online says merchants will not be permitted to pass it on to customers, who will keep paying the listed price.
The charge is therefore a cost of accepting the payment, not an extra amount added to the bill. Analytics Insight also says consumers will not be directly charged the MDR, and describes it as a fee paid by merchants to banks and payment processors.
Person-to-person transfers, including payments to family, friends and self-transfers, remain free at any amount, according to SCC Online. The MDR applies only to specified person-to-merchant (P2M) payments above ₹2,000.
Two outlets report how the fee would be divided. Entrepreneur gives 40% to issuer banks, 30% to merchant acquirers, 20% to UPI apps and 10% to their bank partners. dtnext gives the same percentages with different labels, naming customer banks, payment gateways, the UPI app and the sponsoring bank.
How the Rate and the ₹300 Cap Work
Payments of ₹2,000 or less are free. Above that level the rate is 0.4% of the whole amount, not only the part above ₹2,000. SCC Online's examples show this: a ₹3,000 payment would attract ₹12, and a ₹50,000 payment would attract ₹200.
For payments of ₹75,000 and above, the charge is capped at ₹300, which is the same as 0.4% of ₹75,000. The Week uses a ₹5,000 payment as its example, which would attract ₹20 at the full rate.
Small merchants that receive up to ₹1 lakh a month through a UPI QR code directly into their accounts continue to pay no MDR, SCC Online and Entrepreneur report. Tribune, citing a Finance Ministry statement, says about 96% of all P2M transactions remain unaffected.
Securities and capital-market payments follow a separate rule. Entrepreneur reports that payments to mutual funds, securities and stockbrokers attract a nominal 0.02% MDR, capped at ₹300.
Flat ₹5 Categories and Their Scope
Some categories pay a flat ₹5 per transaction on payments above ₹2,000 instead of the percentage rate. SCC Online lists railways, telecom services, insurance and fuel, along with other notified categories.
The lists differ on the detail. Entrepreneur names railways, telecom, insurance and fuel. Tribune and Analytics Insight also name utilities and education.
The gap between the two methods is widest at higher values. For a ₹5,000 payment in one of those categories, the charge would be ₹5 rather than ₹20. The complete list of categories has not been confirmed.
The Week says the deferral is particularly relevant for retailers, restaurants and e-commerce sellers.
Why NPCI Put Off the Start
The UPI and Services Steering Committee made the decision on Tuesday, 13 October. The committee's reason was the festive season: the decision was taken “keeping in mind the festive season.”
The timeline runs from NPCI's 15 September circular to a 15 October start date, which the decision moved. NPCI says the charge will be implemented after Diwali, on a date to be notified separately. dtnext reports that no new date has been announced.
Upstox gives 8 November as the post-Diwali date. The Tribune report and NPCI's stated wording give no date, so Upstox's date is unconfirmed.
The rate, the ₹2,000 threshold and the ₹300 cap were those in the framework NPCI announced earlier.
The start has now moved to after Diwali, and no date has been set.
What the Delay Means for Merchants and Payment Apps
For merchants, the delay means high-value UPI payments in the festive period will not carry the charge as originally scheduled. Under the rules as reported, a ₹5,000 payment would have carried ₹20 and a ₹75,000 payment the ₹300 maximum, while payments up to ₹2,000 would have stayed free. Shops that take specified payments above ₹2,000 will face the charge only from the new start date, once one is set.
Upstox reports that on 13 October, Paytm shares fell as much as 7.04% intraday, to ₹1,571. At 2:17 pm IST they were at ₹1,688, down 0.18%.
According to Upstox, Pine Labs fell 5.1% and One Mobikwik 4.2% intraday that day, and both recovered after the drop. The same report says Paytm had earlier stated the charge would add revenue from merchant business on many payments that were previously free.
UPI apps would receive 20% of the fee under both reported splits, less than the 40% that goes to customers' banks.
What Remains Open
Three points are unsettled. The start date has not been announced. The full list of flat-₹5 categories has not been confirmed. On whether merchants may pass the charge on, SCC Online reports that they will not be permitted to, while The Week says NPCI's release does not address the point.
The next step NPCI has described is a separate notice that will set the start date. Until that notice is issued, the 0.4% charge remains deferred and has no effective date.
