UPI Merchant Charges: Rollout May Be Postponed to January 2027, Says Report

October 9, 2026

New Delhi: Plans to introduce merchant fees on certain Unified Payments Interface (UPI) transactions may be delayed. According to media reports, the implementation was originally scheduled for October 15, 2026, but it may now be postponed to January 2027. This potential change is reportedly being considered amid concerns from merchants and payment industry stakeholders.

The proposed change relates to the Merchant Discount Rate (MDR), a fee typically charged by banks or payment service providers to merchants for processing digital payments. If the implementation date is postponed, merchants and payment companies may gain additional time to prepare for the new system. However, official confirmation regarding the delay is awaited.

What is the proposed UPI merchant fee proposal?

According to reports, under the proposed framework, eligible person-to-merchant (P2M) UPI transactions exceeding ₹2,000 could be subject to a 0.4 percent MDR. This fee is capped at ₹300 for transactions of ₹75,000 or more.

MDR is a fee charged to merchants for processing merchant transactions. This proposal applies to eligible payments made to shopkeepers and businesses. Regular UPI transfers between individuals are excluded.

The government has maintained that customers will not be charged directly for UPI payments and that most transactions will remain free. However, the actual impact on merchants will depend on the final rules, transaction categories, and exemption provisions.

Why could the October 15 deadline be postponed?

According to media reports, the implementation date is being considered to be extended to give payment companies time to make necessary changes to their systems and prepare for the new system.

The proposed October 15th date coincides with the festive shopping season, during which customer traffic and digital payments are expected to increase. Consequently, merchant organizations and parties in the payment industry have expressed concerns about the new fee system.

The extension to January 2027 may provide additional time for merchants and payment service providers to prepare. However, this cannot be considered a final decision until an official announcement from the relevant authorities.

Could small merchants receive exemptions?

There have also been reports of discussions regarding the criteria for granting exemptions to small merchants in the proposed fee system. According to reports, the eligibility criteria for small merchants may be considered, replacing the monthly UPI receipts limit of ₹1 lakh with an annual turnover of ₹40 lakh.

If such a change is made, it could impact the process for determining which merchants will be subject to the fee. However, this change has not been officially confirmed, and clarity on the final eligibility criteria is awaited.

Furthermore, discussions are reported between payment aggregators and banks regarding the sharing of MDR revenue. The final arrangement in this regard could impact the operation of the new fee system.

Will UPI customers be charged?

The proposed MDR framework primarily relates to eligible merchant transactions. It is not intended to directly charge fees for normal UPI transfers between individuals. The government has stated that customers will not be directly charged for UPI payments, and person-to-person transfers are expected to remain free.

The impact on merchants will depend on the final fee rules and exemption provisions. Small businesses, in particular, will need to be clear about whether they fall under the proposed framework.

Currently, reports suggest that the UPI merchant fee implementation date will likely be extended from October 15, 2026, to January 2027. Until an official announcement is made, the new date and the proposals for exemptions for small merchants should not be considered final.