NPCI Pushes UPI Merchant Fee Until After Diwali

The October 15 start date for a 0.4% charge on some UPI merchant payments has been pushed back. The National Payments Corporation of India (NPCI) said Tuesday the fee will begin after Diwali, with the exact date to be announced later. The move gives shops a break during the busy festive shopping period, but it does not cancel the planned charge. ^1,3

The October 15 date came from an NPCI framework announced last month. It would charge merchants on eligible person-to-merchant payments above Rs 2,000, with a cap of Rs 300 on transactions of Rs 75,000 or more. Payments between individuals and transactions below the threshold remain outside the proposed fee. NPCI’s steering committee said it delayed the start to avoid introducing the charge during the festive season. Diwali falls on November 8 this year. ^1,8,14

The festive season is a major test for retailers, as shoppers spend more and stores rely on quick digital payments. Merchant groups had raised concerns about the fee’s effect on small businesses and customer habits. Merchants pay the charge, not consumers, and banks have been told not to pass it on as a separate fee. Still, retailers warned it could cut into their profits or encourage some sellers to return to cash. More than 95% of merchant UPI payments by volume are expected to remain outside the charge, though payments above Rs 2,000 make up a larger share of total value. ^3,8,14

The pressure on profits has not changed the plan to introduce the fee. The delay also postpones income meant to help pay the banks and payment firms that run and support UPI. Bank account-based payments have had no merchant fee since January 2020, while government incentives have helped keep the system running. NPCI must now set and announce a new start date after Diwali; until then, the proposed fee does not apply. ^3,16