IT IS FREE THIS DIWALI: No Merchant Fee On UPI This Festive Season, NPCI Pushes Rollout

In a major relief for retailers and traders ahead of peak festive shopping, the National Payments Corporation of India (NPCI) has announced that the proposed Merchant Discount Rate (MDR) on select UPI payments will only be implemented after Diwali.

The decision was taken during a meeting of the UPI and Services Steering Committee on October 13, pushing back the previously scheduled rollout date of October 15. NPCI confirmed that keeping the festive surge in mind, the new fee structure for Person-to-Merchant (P2M) transactions will be deferred, with a fresh operational date to be notified separately.

Relief for Merchants During Peak Shopping Season

The deferral comes after retail associations, payment aggregators, and fintech firms approached the payments body and the Ministry of Finance, requesting more time to adapt. Merchant bodies argued that imposing transaction charges during Diwali could burden businesses and dampen consumer sentiment during the year's biggest shopping window.

The framework, originally cleared in mid-September, proposes a 0.4% MDR on select bank-to-account merchant transactions exceeding ₹2,000, capped at ₹300 for high-value payments. Small merchants enrolled under the P2PM category with monthly collections up to ₹1 lakh, along with everyday merchant transactions up to ₹2,000, will continue to attract zero MDR.

Zero Impact on Individual UPI Users

NPCI reaffirmed that consumers making payments will remain completely exempt from any transaction fees. All Person-to-Person (P2P) transfers—whether sending money to friends, family, or personal bank accounts—will stay free regardless of the transaction amount.

Under guidelines issued to banks and payment service providers, merchants receiving payments under the new framework are strictly prohibited from passing the MDR charge onto buyers as a separate convenience fee.

System Upgrades and Category Clarity

The post-Diwali postponement provides banks, payment aggregators, and digital payment apps additional runway to reconfigure software backend systems and clarify category-specific rules.

Under the pending rules, certain essential sectors including fuel, telecom, insurance, railways, and agricultural inputs will qualify for a concessionary flat MDR of ₹5 per transaction on payments above ₹2,000, rather than the standard 0.45% levy. NPCI will issue detailed implementation guidelines and the finalized effective date following the conclusion of the festive season.