NPCI defers 0.4% UPI merchant fee until after Diwali; date to be notified
Representative image: FunkyFocus / Pixabay
NPCI on 13 October 2026 deferred the 0.4% MDR on UPI merchant payments above Rs 2,000, due from 15 October, to a date after Diwali; rates are unchanged.
What Happened
The National Payments Corporation of India (NPCI) on Tuesday, 13 October 2026 postponed the merchant discount rate (MDR) it had planned to start charging on select UPI payments to merchants from 15 October. NPCI's UPI and Services Steering Committee said that, keeping the festive season in mind, the fee will now be brought in immediately after Diwali, on a date to be notified separately. The proposed rates were left unchanged, and NPCI made clear the charge has been deferred, not dropped. Shares of listed payment companies such as Paytm, Pine Labs and MobiKwik fell sharply during the day before recovering.
Key Facts
- Decision: MDR on select person-to-merchant (P2M) UPI transactions deferred until after Diwali; no new start date announced yet.
- Original plan: an NPCI circular issued in mid-September 2026 had set the start date as 15 October 2026.
- Rate: 0.4 per cent on eligible merchant payments above Rs 2,000, capped at Rs 300 per transaction (the cap is reached at Rs 75,000).
- Example: a Rs 3,000 eligible payment would carry a fee of Rs 12, paid by the merchant, not the customer.
- Exempt: person-to-person transfers, and small merchants receiving up to Rs 1 lakh a month through existing QR codes.
- Market move: Paytm fell more than 7 per cent to an intraday low of Rs 1,571 and Pine Labs more than 5 per cent to Rs 154.42 before both recovered.
- Diwali falls on 8 November this year.
Why It Matters
UPI has been free for merchants for years. The government's zero-MDR policy helped it become India's main way to pay, but it also left banks and payment apps carrying the cost of running the system with little direct income from it. The MDR plan was the first serious step to change that for larger merchant payments. For fintech start-ups and listed payment companies, it is a question of business model: a fee on high-value merchant payments would give them a new, recurring source of revenue from the payments they already process.
That is why the deferral hit share prices on the day. Analysts had counted on the fee as fresh revenue, and any delay pushes that income further out. The rebound later in the day suggested investors read the decision as a short postponement rather than a reversal, especially since NPCI kept the rate card unchanged.
The decision also shows how much politics shapes digital payments. Merchant bodies had pressed for a delay, arguing that a new charge during the festive shopping season could hurt sales. A traders' body had written to Finance Minister Nirmala Sitharaman in September seeking a rollback, saying around six crore shopkeepers and traders would be affected, and opposition parties had called the levy a tax. For founders building on UPI, the episode is a reminder that pricing in this market can be set or reset by a steering committee, not by the company.
| Item | Before 13 October | After 13 October |
|---|---|---|
| Start date | 15 October 2026 | After Diwali, date to be notified |
| Rate on eligible payments above Rs 2,000 | 0.4%, capped at Rs 300 | Unchanged |
| Person-to-person transfers | Free | Free |
| Small merchants up to Rs 1 lakh a month | Zero MDR | Zero MDR |
Impact
Short-term: Merchants will keep accepting UPI payments above Rs 2,000 without a fee through the Diwali shopping season. Payment companies lose the fee income they expected from mid-October.
Long-term: The plan to charge larger merchants remains. Once a date is set, payment firms gain a revenue stream from high-value UPI transactions, and larger merchants will have to factor a cost of up to Rs 300 per transaction into pricing.
Who is affected: Larger merchants and retailers, banks and UPI apps, listed fintech companies and their investors, and start-ups whose revenue models depend on merchant payments.
Key Takeaway
NPCI has pushed the 0.4 per cent UPI merchant fee to a date after Diwali, giving merchants a fee-free festive season but leaving payment companies waiting for the revenue.
Questions and Answers
Will customers have to pay a charge on UPI payments?
No. The MDR is paid by merchants on eligible payments above Rs 2,000. Person-to-person transfers remain free, and customers are not charged.
When will the UPI MDR now start?
NPCI has said it will start immediately after Diwali, which falls on 8 November 2026, but it has not yet announced the exact date. It will be notified separately.
How much will merchants pay once it starts?
0.4 per cent of eligible payments above Rs 2,000, up to a maximum of Rs 300 per transaction. Small merchants receiving up to Rs 1 lakh a month through existing QR codes stay at zero MDR.
Why did fintech shares fall on the news?
Investors had expected the fee to add new revenue for payment companies such as Paytm, Pine Labs and MobiKwik from mid-October. The delay pushes that income back, although the shares recovered most of their losses as the fee was deferred rather than scrapped.
Disclaimer: Prepared by the Peepals newsroom from publicly available sources with AI assistance. Information is accurate to the best of our knowledge at the time of publication and may change. Images may be representative. Not professional advice. Report an error via our contact page.
Sourced and fact-checked by the Peepals Global Editorial Team
OpenAI engineer charged with planting recording device in executive conference room
Hinton, Bengio among hundreds urging air-gapped testing of hacking-capable AI
Reported, fact-checked and published by the Peepals Global Editorial Team.
