UPI Merchant Charge of 0.4% Put on Hold Until After Diwali

Fintech News · 18 October 2026 · 2 min read

In short: On 13 October 2026, NPCI postponed the planned 0.4% merchant discount rate (MDR) on some UPI payments, which was due to start on 15 October. NPCI said it will be implemented “immediately post Diwali” on a date to be announced. It has been delayed, not dropped.

What was planned

• 0.4% of the payment on person-to-merchant UPI payments above ₹2,000, capped at ₹300 for payments of ₹75,000 or more.
• A flat ₹5 on payments above ₹2,000 for railways, telecom, insurance, fuel and agricultural inputs.
• 0.02% (capped at ₹300) on payments to mutual funds, stockbrokers and other securities businesses.

Does this affect you as a customer?

No. The charge is paid by the merchant, and banks have been told to make sure merchants do not pass it on to customers. These stay free:

• Sending money to friends and family (person-to-person), at any amount.
• Merchant payments of ₹2,000 or less.
• Payments to small merchants, who stay on zero MDR.

About 4% of merchant UPI payments would fall under the charge. The finance ministry says MDR is not a tax; it is shared between banks and payment apps to pay for running and securing the system.

Good to know

A challenge to the charges is pending in the Supreme Court, which declined to put them on hold and asked the Centre, RBI and NPCI to respond. If a shop adds a “UPI fee” to your bill after the charge starts, you can report it to the shop’s bank or payment app.

Sources

• CIOL: NPCI delays UPI merchant charges until after Diwali (13 October 2026)
• Manorama Yearbook: NPCI postpones levy of MDR on UPI transactions
• CAclubindia: UPI transaction charges, latest update

This is a news summary for education, not financial advice. Rates and terms change; confirm the latest details with your bank or the official source.

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