New plan to charge merchants a small fee on certain UPI transactions is being delayed as retailers raise concerns about costs and customer impact.
The plan to charge merchants a 0.4% fee on eligible UPI transactions has been paused. India’s National Payments Corporation (NPCI), which runs the Unified Payments Interface, said the rollout will happen after the Diwali festival but did not set a new date. This would mark a shift away from years of keeping UPI payments free for merchants.
NPCI says the fee is intended to help cover the costs of running UPI, including server capacity, cybersecurity and fraud prevention. Earlier, UPI processed billions of transactions each month, underscoring the system’s scale and the burden of maintaining it as usage grows.
Retailers and fuel stations have spoken out against the charge, warning they might reduce acceptance of UPI payments if the cost lands. The pushback highlights concerns that higher costs could be passed to customers or lead to fewer merchants offering UPI at checkout.
UPI has become a backbone of India’s digital payments, connecting popular wallets and banks that consumers use for everyday purchases. The government previously kept UPI free for merchants since its launch, a policy that may face changes as the ecosystem expands and costs rise.
NPCI had proposed exemptions for smaller transactions and for smaller merchants, aiming to shield everyday payments from new charges. For example, smaller payments could be exempt, and the fee would be capped for larger transactions. The idea is to allow the system to grow while sharing the burden of infrastructure costs with participants.
The festival shopping season is a busy time for retailers and payment providers. By delaying the rollout, NPCI is giving itself time to listen to industry concerns and consider adjustments before a final date is set.
For everyday users, the immediate effect is uncertainty. If the fee eventually arrives, shoppers could see small price increases on purchases paid with UPI, or merchants could absorb some costs, affecting acceptance at the counter.
In short, the payments backbone remains free for now, but a new merchant fee could come later. Industry briefings and stakeholder discussions will shape the next step.
UPI MDR on Select Merchant Transactions Shall be Implemented Post Diwali
Press Release Link: https://t.co/5KMjOP0tHd pic.twitter.com/pD8IKfN6sR
— NPCI (@NPCI_NPCI) October 13, 2026
The main question for shoppers is whether paying with UPI will cost more in the future. The pause gives time to see how merchants react, whether they absorb the cost or pass it along in higher prices.
For small merchants, the change could influence the economics of mobile payments. If a fee is introduced, businesses will weigh the cost against the speed and convenience of UPI for customers.
Merchants that accept UPI payments and the payment processors handling those transactions would be most affected, along with the banks and wallets tied to the system.
The NPCI did not set a new date beyond “after Diwali.” Expect more industry briefings and stakeholder feedback as the federation considers its next steps.
What is changing with UPI fees?
The plan would charge merchants a 0.4% fee on eligible UPI transactions, with possible exemptions for smaller payments and merchants.
When will the fee start?
The rollout has been delayed beyond the planned date and will occur after the Diwali festival, with no new date announced yet.
Why are retailers pushing back?
Retailers say higher costs could be passed to customers or lead to fewer payments accepted via UPI, which could affect shopping during a peak season.
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