NPCI Defers UPI Merchant Fee Until After Diwali; Fintech Stocks Recover Intraday Losses

The National Payments Corporation of India (NPCI) on Tuesday officially postponed the start of a merchant fee on select UPI payments, removing a new cost from the busiest shopping weeks of the year. The merchant discount rate (MDR), which was scheduled to take effect on October 15, will now be implemented immediately after Diwali, on a date NPCI says it will announce separately.

The decision was taken by NPCI's UPI and Services Steering Committee, which said it was acting with the festive season in mind. Last week, reports that the fee could slip to January 1, 2027 had sent fintech stocks sharply lower (see our earlier coverage). Tuesday's announcement settles the question of whether October 15 holds, though not the final start date.

What the Fee Covers

The framework itself appears unchanged. Large merchants would pay 0.4% on eligible person-to-merchant UPI payments above Rs 2,000, with the charge capped at Rs 300 for transactions above Rs 75,000. In certain essential categories, including railways, telecom, insurance, fuel, utilities and education, a flat fee of Rs 5 would apply instead on payments above Rs 2,000.

Several groups stay outside the net. Money sent between individuals remains free. Small merchants collecting up to Rs 1 lakh a month through their existing QR codes stay in the zero-MDR regime. The Finance Ministry has estimated that about 96% of all person-to-merchant UPI transactions will be unaffected. Consumers do not pay the charge directly; it is levied on the merchant side.

Why the Timing Matters

Diwali is the peak period for retailers, restaurants and online sellers, and UPI has become the default way many customers pay. Introducing a new charge just as payment volumes surge would have hit merchants at their most sensitive moment. Deferring it gives businesses one more festive season without the cost.

NPCI's wording, implementation immediately after Diwali, suggests a start soon after the festival rather than the January date floated in earlier reports, but no date has been fixed. NPCI also has not said whether the list of eligible merchant categories or any exemptions will change before the rollout.

Fintech Stocks Bounce Back

For listed payment companies, the MDR is the first meaningful chance to earn revenue from UPI merchant payments, which have been free for years. Shares of One 97 Communications (Paytm's parent), MobiKwik and Pine Labs had been trading lower on Tuesday but erased those losses after NPCI's statement. A firm commitment to roll out the fee shortly after Diwali removes some of the uncertainty that had weighed on these stocks since last week.

Traders Are Not Satisfied

Not everyone welcomed the move. Trader groups said a postponement does not address their concerns, and maintained that UPI payments should stay free of MDR for merchants altogether. Their objection is likely to resurface once NPCI announces the new date.

What Comes Next

The next milestone is NPCI's notification of the start date, along with final operational rules. Merchants who handle large UPI payments, especially above Rs 2,000, should watch for that announcement and check with their payment provider how the charge will appear on settlements. For investors in fintech stocks, the fee's actual start, rather than further reports about it, is what will begin to show up in revenue.

This is an original summary based on public reporting. See our editorial policy for how we source, write, and correct our stories.