NPCI has decided to defer the implementation in view of the festive season. It has indicated that the charges will be introduced immediately after Diwali but has not announced a specific implementation date. Since Diwali falls on November 8, 2026, the new rules could come into effect in the second week of November. Until then, customers and merchants can continue using UPI without the proposed changes taking effect during the festive period.
Under the proposed structure, eligible merchants would have to pay an MDR charge of 0.4% on the total amount of every individual UPI payment exceeding ₹2,000. For a payment of ₹2,500, the merchant would pay ₹10; for ₹5,000, the charge would be ₹20; and for ₹10,000, it would be ₹40. For transactions worth ₹75,000 or more, the charge would be capped at ₹300 instead of continuing to increase proportionately. The applicable charges would be subject to 18% GST, including the capped charge.
Special provisions have also been outlined for certain sectors. Payments exceeding ₹2,000 at petrol pumps, railway services, bill payments, telecommunications, insurance and education establishments would attract a flat fee of ₹5 per transaction instead of the percentage-based charge.
The proposed rules also distinguish between small and large merchants according to their monthly UPI collections. Merchants collecting up to ₹1 lakh through UPI in a month would remain exempt from charges even on individual transactions exceeding ₹2,000. Merchants collecting more than ₹1 lakh a month would be charged 0.4% MDR, plus 18% GST, on every transaction above ₹2,000. Payments of ₹2,000 or less would remain free even for large merchants.
The ₹2,000 exemption would apply separately to each transaction rather than to the merchant's total daily sales. Consequently, each individual payment would be assessed independently under the proposed framework. For eligible large transactions worth ₹75,000 or more, the maximum charge would be ₹300 plus 18% GST.
The rules also include a provision for merchants whose business category changes over time. If a small merchant records monthly UPI collections exceeding ₹1 lakh for three consecutive months, the bank would automatically shift the merchant into the large-merchant category.
The proposed UPI charge is lower than the merchant fees associated with conventional card payments. Credit card MDR charges generally cited in the proposal range from 1.5% to 2.5%, while debit card charges can reach up to 0.90%.
NPCI's decision to postpone the charges comes ahead of one of India's busiest retail periods. Markets across the country typically see increased sales of clothing, electronics, jewellery and other goods during Diwali, accompanied by higher digital payment activity. Business organisations and payment companies had expressed concerns that introducing a new fee structure during the festive season could disrupt payment processes at shops.
The proposal had faced opposition from traders and opposition political leaders across the country. Opposition leaders raised political concerns and questioned the potential impact on ordinary people, while business organisations warned that the charges could increase operating costs and potentially place an additional burden on customers. They argued that small businesses would be particularly vulnerable to the financial impact.
Under the proposed structure, the direct MDR charge would be paid by the merchant rather than the customer. However, traders' organisations have raised concerns about the possibility of higher business costs affecting customers indirectly.
Merchant Discount Rate, or MDR, is the fee paid by a merchant to banks and payment service providers for accepting digital payments through facilities such as debit cards, credit cards, point-of-sale machines and payment gateways. The fee helps cover the cost of operating digital payment infrastructure and transaction networks. Under the proposed UPI framework, the applicable fee would be the merchant's responsibility rather than a separate charge imposed directly on the customer.
Although transactions exceeding ₹2,000 account for less than 5% of merchant UPI payments by volume, they represent a significantly larger share of the total transaction value. According to the figures cited in the proposal, these transactions account for approximately 67% of the total money involved in merchant UPI payments. Their value is estimated at around ₹6 lakh crore per month, representing approximately 20% of the value of all UPI transactions across the country. This means that high-value transactions remain relatively limited in number but account for a substantial share of the money circulating through the payment system.
The proposed fee structure also comes against the backdrop of the government's efforts to encourage digital payments while keeping UPI accessible. The government introduced an incentive scheme in 2021-22 to promote UPI and support its free usage. Under the scheme, an incentive of 0.15% was provided on UPI payments of up to ₹2,000 made by customers to small merchants. A total of ₹8,276 crore was disbursed under the scheme up to 2024-25. By June 2026, India had approximately 55.5 crore UPI users.
With the festive season approaching, NPCI's decision has temporarily put the proposed merchant charges on hold. The corporation is expected to announce the implementation date immediately after Diwali, although no official date has yet been specified. The eventual rollout will determine when eligible merchants begin paying the proposed fees on high-value UPI transactions, while payments between ordinary individuals and qualifying smaller merchant transactions are set to remain exempt under the stated provisions.
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