Mumbai.
The National Payments Corporation of India (NPCI), in consultation with the Union Finance Ministry, is reportedly considering postponing the implementation of the proposed 0.4% Merchant Discount Rate (MDR) on high-value UPI transactions. Originally set to kick off on October 15, 2026, the rollout is now expected to be pushed to January 2027.
This decision comes after payments companies, fintech aggregators, and merchant associations requested additional time to adjust backend integration systems and avoid friction during the peak festive shopping period.
Why Is NPCI Considering a Postponement?
The October-to-December quarter marks the busiest retail and festive shopping season across India. Introducing a new fee structure on large digital transactions right before major regional and national festivals raised concerns among business bodies.
Original Proposed Timeline : October 15, 2026
Expected Revised Timeline : January 2027 (Post-Festive Season)
Targeted Fee Structure : 0.4% MDR on Merchant Transactions > ₹2,000
Targeted Users : Businesses & Merchants (P2M only)
Key factors driving the deferral include:
- Protecting Festive Demand: Preventing added operational costs or friction during high-volume shopping months.
- System Preparedness: Giving fintech providers (like PhonePe, Google Pay, Paytm, and Pine Labs) adequate buffer to implement category-wise MDR rules.
- Addressing Ambiguities: Resolving rate classification questions across special sectors such as mutual funds, stock brokerages, fuel stations, and loan repayments.
Who Pays the 0.4% Fee: Consumers or Merchants?
There is widespread confusion regarding who incurs this fee. The proposed 0.4% MDR is a Merchant Discount Rate, meaning it is paid by merchants to acquiring banks and payment gateways—it is not a direct charge on individual shoppers.
- Person-to-Person (P2P): Completely free ( charge across all amounts).
- Person-to-Merchant (P2M) Under ₹2,000: Free ( charge).
- Person-to-Merchant (P2M) Over ₹2,000: Eligible for a 0.4% MDR fee levied on the merchant.
Cost Structure Breakdown for Merchants
| Transaction Value | Transaction Type | Fee Rate | Merchant Fee Paid | Consumer Cost |
| ₹1,500 | Retail Purchase | 0.0% | ₹0.00 | ₹0.00 |
| ₹2,000 | Electronics / Grocery | 0.4% | ₹8.00 | ₹0.00 |
| ₹5,000 | Shopping | 0.4% | ₹20.00 | ₹0.00 |
| ₹10,000 | High-Value Retail | 0.4% | ₹40.00 | ₹0.00 |
Note: The fee is capped per transaction to ensure high-ticket transactions (such as jewelry or electronics) remain viable.
How Stakeholders Are Affected
Everyday Shoppers & Consumers
Direct transactions remain free. However, once the fee goes live in 2027, certain high-value businesses operating on narrow margins might encourage direct bank transfers or offer slight cash/bank-app discounts to avoid merchant fees.
Retailers & Small Businesses
Over 90% of daily micro-transactions in India remain under ₹2,000, meaning small kirana stores and roadside vendors will not pay any extra charges. Larger retailers gain valuable breathing room during the festive rush.
Payment Aggregators & Stock Markets
Payment platforms look at MDR as a path to sustainable monetization. Following reports of the potential delay to January 2027, major digital payment shares experienced short-term market adjustments as revenue realization shifted to next year.
Frequently Asked Questions (FAQ)
Will I be charged 0.4% extra when paying shopkeepers via UPI?
No. The proposed 0.4% MDR is paid by the merchant receiving the payment, not the customer making it.
Is UPI free for transactions below ₹2,000?
Yes. All UPI transactions under ₹2,000 remain zero-rated across all merchant categories.
Are money transfers to friends and family charged?
No. Person-to-Person (P2P) money transfers between accounts remain 100% free regardless of the transaction amount.
When will the 0.4% UPI charge take effect?
While originally planned for October 15, 2026, NPCI is expected to notify a revised implementation date of January 2027.
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Disclaimer
This article is for informational purposes only and is based on recent regulatory announcements and official reports from NPCI. Official guidelines may be subject to further updates prior to notification.
