The National Payments Corporation of India (NPCI) announced on Tuesday that its UPI and Services Steering Committee had resolved, on 13 October, to postpone the introduction of Merchant Discount Rate (MDR) fees on certain Person-to-Merchant UPI transactions until after the Diwali festival period. The schedule adjustment was made in response to appeals from traders who had sought more time before the charges took effect. A revised implementation date would be communicated at a later stage, according to the NPCI.
A rollout date of 15 October had been set at that point, placing it within the festive shopping period — a stretch of the calendar when household expenditure on goods tends to climb. The launch was held back, allowing payment firms and their customers additional time to adapt their infrastructure while also accounting for concerns tied to the holiday period.
The UPI Steering Committee had set a merchant discount rate of 0.4 per cent on UPI transactions exceeding Rs 2,000 during the first part of September. When retailers accept digital payments, they pay a transaction-handling levy known as the MDR. Measured against a UPI transaction of Rs 2,000, that 0.4 per cent levy works out to Rs 8, climbing to Rs 40 once the payment reaches Rs 10,000.
Transactions exceeding Rs 2,000 within certain industries — among them railways, telecom, insurance, fuel, and agricultural inputs — carry a fixed MDR charge of Rs 5. Officials stated the fee outlined in the proposal would channel funds toward the operational backbone of UPI, covering areas such as system resilience, cybersecurity, fraud prevention, and customer support.
Under the government's clarification, merchants — not consumers — would absorb the fee, with a ceiling of Rs 300 applying to any transaction reaching Rs 75,000 or above. No charges would apply to person-to-person transfers or to routine everyday purchases.
Figures drawn from sector projections and included in a Finance Ministry paper published that September placed the yearly cost of maintaining UPI's operational infrastructure at around Rs 20,000 crore. The Centre's position, as laid out in its submission, holds that relying solely on government incentives was never a viable path for sustaining the payments ecosystem over time, while a proposed merchant fee on UPI transactions above Rs 2,000 would place an added financial burden on businesses — particularly smaller outfits such as neighbourhood shops and service-based operators whose day-to-day operations lean heavily on digital payment channels.
Payment processors may legitimately need these charges to offset operational costs, though analysts note that scrutiny of the arrangements remains warranted. Elevated transaction costs on UPI payments raise the possibility that merchants would scale back their acceptance of the platform.
Mukesh Pandey, who founded and heads Rupyaapaisa.com, told a news outlet that businesses could respond by passing those added costs along to consumers through higher prices. UPI's broad accessibility, minimal cost, and straightforward interface were cited as the factors behind its widespread adoption.
Atish Shelar, who serves as Group CEO of MOS Utility Limited, noted in remarks to a news channel that with UPI now woven into the day-to-day transactions of commerce — particularly for smaller enterprises — any ambiguity over fee structures stands to affect how customers perceive the overall experience. The extended timeline offers an opportunity to strengthen readiness without slowing the momentum behind cashless payment uptake, ahead of the official launch date.
