India Considers Delaying New UPI Merchant Transaction Fees

The National Payments Corporation of India (NPCI) is considering postponing the implementation of a merchant discount rate (MDR) on Unified Payments Interface (UPI) transactions. Originally scheduled for October 15, 2026, the rollout may be delayed until January 1, 2027, to protect merchants and consumers from increased costs during the annual festive season and to address inflation concerns.

The proposed framework introduces a 0.4% fee on person-to-merchant (P2M) transactions exceeding ₹2,000, with a cap of ₹300 for transactions of ₹75,000 and above. Certain categories, such as education and utilities, would face a flat ₹5 fee. Person-to-person transfers and P2M transactions under ₹2,000 remain free. The Department of Financial Services clarified that these fees are borne by merchants and cannot be passed to consumers.

Reserve Bank of India Governor Sanjay Malhotra stated that the small fees are unlikely to significantly impact transaction volumes. However, retail traders' associations and fintech companies requested the deferment due to policy confusion. In response, the UPI and Services Steering Committee is evaluating exemptions for businesses with annual turnovers up to ₹40 lakh.

News of the potential delay caused shares of payment aggregators to drop by up to 10%, with Paytm falling 7.6% and MobiKwik declining 7.2%. Investors had viewed the MDR as a key monetization opportunity for these providers. Separately, Governor Malhotra addressed the Indian rupee's depreciation toward 96.96 against the US dollar, pledging that the central bank will ensure currency stability.