UPI merchant fee on payments above Rs 2,000 pushed to after Diwali: what it is

The National Payments Corporation of India (NPCI) said on Tuesday, October 13, that a merchant fee on UPI payments above Rs 2,000 will be imposed after Diwali, which falls on November 8 this year, according to Scroll. The fee had been due to take effect on October 15. Scroll reports that NPCI cited the festive season, and it gives no new start date. Mathrubhumi says a revised schedule will be finalized after the festival and attributes the decision to NPCI's steering committee.

What the fee is

The charge is a merchant discount rate (MDR) of 0.4% on UPI payments to merchants above Rs 2,000, according to Scroll. Two Finance Ministry notifications, issued on September 14 and 15, set it out, and the ministry said the fee would be capped at Rs 300 per transaction for payments of Rs 75,000 and above.

Sector rates differ. Mathrubhumi reports a flat Rs 5 per transaction above Rs 2,000 for fuel stations, utilities, insurance premiums and railway bookings. The Free Press Journal lists railways, telecom, insurance, fuel and agricultural inputs for the flat Rs 5, and says capital market transactions would pay 0.02%, capped at Rs 300. It gives an example: a Rs 5,000 payment would carry a Rs 20 fee.

Who pays and who is exempt

The fee is charged to merchants, not to people sending money to one another. Scroll reports that the Finance Ministry said the framework would not affect person-to-person transfers, whatever the amount, and that the government advised banks to ensure the charges are not passed on to customers. Mathrubhumi adds that merchants may not add surcharges at checkout. Payments of Rs 2,000 or less are exempt.

Scroll reports that on September 28 Additional Solicitor General N Venkataraman told the Supreme Court that 96% of transactions would not attract the charge. Citing The Indian Express, Scroll says payments above Rs 2,000 made up 4% of person-to-merchant UPI payments by count in 2025-26 but nearly two-thirds of their total value. The Free Press Journal reports NPCI's view, from its FAQ, that the fee is well below credit card charges and so gives merchants little reason to raise prices; the same article notes concern that shopkeepers could raise prices on high-value purchases.

Reaction before the deferral

Scroll reports that Opposition parties, retailers and consumers raised concerns, that the Opposition demanded a rollback, and that a petition in the Supreme Court in September argued businesses may pass the cost to consumers. On September 23, traders in Madhya Pradesh covered their QR codes and asked customers to pay in cash.

What is still open

No outlet read gives a new effective date. The Free Press Journal, in an article updated on October 12, before NPCI's announcement, reported that Reuters had suggested a postponement to January 1, 2027, and said NPCI had not finalized a timeline. Mathrubhumi says the delay gives banks, payment aggregators and fintech apps time to update their accounting systems.