India Delays 0.4% UPI Merchant Fee After Retailer Backlash
India delays UPI's October 15 merchant fee until after Diwali after retailer backlash, postponing a 0.4% charge on payments above ₹2,000 in India.
Summary
On Tuesday, October 13, 2026, the National Payments Corporation of India postponed its October 15 rollout of a 0.4% fee on eligible UPI merchant transactions above ₹2,000, about $21, until after Diwali, without setting a new date. Announced in September to make payment processing more viable for providers in a market dominated by Google and PhonePe, the charge prompted retailers and petrol pump operators to warn they could stop accepting UPI during the festive shopping season. It would reverse India’s policy of free merchant payments, introduced in January 2020 to accelerate the shift from cash.
UPI processed 24.07 billion transactions worth ₹29.37 trillion, about $305 billion, in September through apps including Google Pay, PhonePe and Paytm. Transactions of ₹2,000 or less and merchants receiving under ₹100,000, about $1,033, monthly would be exempt, while larger charges would be capped at ₹300, around $3. NPCI planned to distribute revenue across the ecosystem for infrastructure, cybersecurity and fraud prevention, citing annual operating costs of about ₹200 billion, or $2.1 billion, for server capacity, fraud prevention and technical support. Government subsidies currently help banks and payment providers cover costs. NPCI established its international arm in April 2020, and UPI is available in Singapore, the United Arab Emirates and France.
Positives
- UPI merchants will remain free from the proposed 0.4% charge through the critical Diwali shopping period.
- Payments of ₹2,000 or less and merchants receiving under ₹100,000 monthly would remain exempt under the proposal.
- ₹300 caps would limit fees on larger eligible UPI transactions.
- 24.07 billion transactions worth ₹29.37 trillion in September demonstrate UPI’s enormous adoption.
- Fee revenue would support infrastructure, cybersecurity and fraud prevention across the UPI ecosystem.
- UPI is already available internationally in Singapore, the United Arab Emirates and France.
Risks & concerns
- Retailers and petrol pump operators warned they could stop accepting UPI if the 0.4% fee took effect.
- NPCI set no replacement date for the rollout beyond saying it would follow Diwali.
- ₹200 billion in annual operating costs leave banks and payment providers seeking a sustainable way to recover expenses.
- Merchant fees would reverse India’s free UPI policy in place since January 2020.
- Google and PhonePe dominate the payment service market that the proposed fee was intended to make more viable.