People using digital payments in India and merchants accepting them will continue under the existing arrangement for now, after the National Payments Corporation of India (NPCI) postponed the planned introduction of selected merchant transaction charges until after Diwali. In a statement issued on Tuesday, October 13, 2026, NPCI said the implementation date had been deferred in view of the festive season. The revised date will be announced later, meaning the proposed changes will not take effect before Diwali as originally planned. The decision provides temporary relief to merchants preparing for the busy festive shopping period, when digital payments are widely used for purchases, retail transactions and other commercial activities. It also gives businesses more time before the proposed changes are introduced. The main point for consumers is that the proposed charges are aimed at certain eligible merchant transactions, not ordinary transfers between individuals. The planned UPI charges are linked to the merchant discount rate, commonly known as MDR, which applies to the acceptance and processing of eligible digital payments.

Which UPI Transactions Could Attract MDR?

The proposed changes focus on selected commercial payments made to merchants. They are not intended to introduce a general fee on every transaction completed through India's digital payment system. Under the reported framework, eligible merchant transactions above ₹2,000 would attract an MDR rate of 0.4 per cent. For transactions exceeding ₹75,000, the maximum charge would be ₹300. The proposed structure distinguishes between ordinary purchases and qualifying commercial payments. Whether a transaction attracts a charge would depend on the merchant category, payment type and applicable rules. For example, a qualifying merchant transaction worth ₹5,000 would generate an MDR amount of ₹20 at a rate of 0.4 per cent. A qualifying transaction worth ₹50,000 would generate ₹200 at the same rate. For a transaction above ₹75,000, the reported cap would limit the MDR to a maximum of ₹300. These examples illustrate the proposed calculation, not a charge currently payable by every customer. The final application of the rules will depend on the official implementation details.

Will Customers Have to Pay Extra for UPI Payments?

For ordinary users, the key distinction is between paying a merchant and transferring money to another person. Under the reported proposal, normal person-to-person UPI transfers would remain free, regardless of the amount transferred. This means that sending money to a friend or family member through a standard individual-to-individual transfer would not attract the proposed merchant discount rate. Payments made to shops and businesses are treated differently because they involve the acceptance of digital payments by merchants. Certain eligible commercial transactions could fall under the proposed MDR structure once the rules take effect. The delay also means the existing arrangement will continue until NPCI announces a revised date and the new rules become applicable. Customers should not assume that a transaction above ₹2,000 will automatically attract a fee simply because it uses UPI. The relevant question is whether the payment falls within the eligible merchant categories covered by the final rules.

Proposed Charges for Railway, Fuel, Utility and Education Payments

The reported framework also provides a separate fee structure for selected essential services and other categories. For eligible merchant transactions above ₹2,000 in areas such as railways, telecommunications, insurance, petrol and diesel, electricity, water utilities and education, the reported MDR is a flat ₹5 rather than a percentage-based charge. This approach would make the fee calculation different from the proposed 0.4 per cent rate applicable to certain other merchant transactions. For instance, if a transaction qualifies under one of these specified categories, the proposed flat fee would be ₹5. The applicable treatment would depend on the merchant's classification and the final rules issued for implementation. The distinction matters because not all digital payments are treated identically under a merchant fee framework. A payment for a service may fall under a different category from a purchase at a general retail shop.

Small Merchants to Continue Receiving Relief Under Zero-MDR Rules

Small businesses are another important part of the proposed framework. According to the information provided, merchants receiving up to ₹1 lakh per month through existing QR codes would continue to benefit from the zero-MDR arrangement. This provision is intended to protect smaller merchants from additional payment acceptance costs within the stated eligibility conditions. Small shopkeepers, neighbourhood retailers and other businesses often rely on QR-based payments because they allow customers to pay without cash. For these businesses, even a small processing fee can affect operating costs, particularly when profit margins are limited. Maintaining zero MDR for qualifying small merchants would help preserve the affordability of digital payment acceptance. However, eligibility would depend on the conditions set out in the applicable rules, so merchants should check the official guidance rather than assume that every business automatically qualifies. The reported policy also states that around 96 per cent of merchant UPI transactions would not be affected by the proposed arrangement, based on an earlier clarification from the Finance Ministry.

What Is MDR and Who Pays It?

The merchant discount rate (MDR) is a fee associated with accepting and processing certain digital payments. It is generally paid by a merchant to the relevant banks or payment-processing participants under the applicable arrangement. MDR is different from a government tax. It is a payment-processing charge intended to support the costs associated with handling digital transactions and maintaining payment infrastructure. The fee structure can vary depending on the payment method, merchant category and applicable policy. A proposal to introduce MDR on selected transactions does not mean that every UPI user must pay a fee whenever they make a digital payment. For merchants, the practical impact depends on whether their transactions fall within the categories covered by the rules and whether any exemption applies. For consumers, the distinction is equally important. The existence of a merchant processing fee does not automatically mean that the same fee will be charged separately to the person making the payment. How a merchant handles any associated cost must be considered separately from the MDR framework itself.

Why Has NPCI Delayed the Decision Until After Diwali?

The festive season is an important period for India's retail sector, with businesses often experiencing increased customer activity and payment volumes. By postponing the proposed changes, NPCI has given merchants additional time before the new MDR framework is introduced. The organisation cited the festive season in its statement announcing the delay. The timing is relevant for retailers that depend on digital payments for day-to-day sales. A change in payment-processing costs can require businesses to review their accounting practices, payment arrangements and operational procedures. The postponement does not mean that the proposal has been cancelled. Instead, the implementation date has been deferred, with a revised date expected to be announced later. Until that announcement is made, merchants should continue following the existing applicable rules and avoid treating the proposed rates as active charges.

Read Also: CJP Leaders Detained at Jantar Mantar After Fresh Protest Attempt

What Should UPI Users and Shopkeepers Do Now?

For customers, there is no need to assume that all UPI payments above ₹2,000 will suddenly become chargeable. The proposed MDR rules apply to specified merchant transactions, while normal person-to-person transfers are described as remaining free. For shopkeepers and business owners, the next step is to monitor official NPCI updates and check whether their payment categories fall within the proposed framework. Merchants that qualify for zero-MDR treatment should also verify the applicable eligibility conditions. Businesses in sectors such as fuel, railways, telecommunications, insurance, utilities and education should pay particular attention to the final category-specific instructions because their reported proposed fee differs from the percentage-based rate. The revised implementation date will determine when any applicable changes begin. Until then, the postponement keeps the existing arrangement in place.