Merchant Fee on Rs 2,000-Plus UPI Payments to Be Imposed After Diwali

The merchant fee on select UPI payments above Rs 2,000 will be introduced after Diwali, the National Payments Corporation of India (NPCI) announced on October 13. The rollout, originally scheduled for October 15, has been postponed, with the revised implementation date to be notified separately.

In a statement, NPCI said its UPI and Services Steering Committee had decided to defer the Merchant Discount Rate (MDR) on select person-to-merchant (P2M) transactions, keeping the festive season in mind. Diwali falls on November 8, 2026.

Under the proposed framework, eligible merchant UPI payments above Rs 2,000 will attract an MDR of 0.4%, payable by merchants. The charge is capped at Rs 300 per transaction.

Person-to-person (P2P) transfers will remain exempt, as will merchant transactions of Rs 2,000 or less. Small merchants receiving less than Rs 1 lakh per month through UPI are also exempt under the announced framework.

The postponement means merchants will have additional time before the proposed UPI transaction charges take effect. NPCI has not yet announced a revised rollout date.

The proposed UPI merchant discount rate will only apply to high-value merchant payments, not to every UPI transaction. This difference matters a lot for businesses that accept payments and for customers who use UPI for daily shopping.

The proposed MDR is a merchant-side charge. The government has also advised banks to ensure that merchants do not pass the fee on to customers.

The postponement changes the rollout schedule, not the proposed fee structure. The next key development will be NPCI’s confirmation of when the MDR framework takes effect.