The government has deferred the implementation of a fee on large payments through the UPI platform until immediately after the Diwali festival, bringing cheer to the traders who were resisting the move away from zero-cost transactions.

The postponement is “keeping in mind the festive season” and the rollout date will be notified separately, the National Payments Corporation of India (NPCI) said. The Diwali festival falls on 8 November and marks high consumer spending.

Since the festive season extends to the December month as well, the expectation is that the implementation will shift to January 2027. The NPCI statement, however, mentioned ‘immediately after Diwali’.

Until now free, the NPCI had earlier notified that a 0.4% charge for merchants on transactions exceeding Rs 2,000 would take effect on 15 October. It would be on eligible person-to-merchant Unified Payments Interface (UPI) transactions, but would be capped at Rs 300 for transactions of Rs 75,000 and above. 

There would, however, be no charge for person-to-person transactions, irrespective of the amount. 

Under the merchant discount rates (MDR) framework, utilities, railways, telecom services, insurance and fuel would have a flat-rate structure of Rs 5 per transaction for payments above Rs 2,000.

The revised MDR system will end more than  six years of zero-cost UPI payments, allowing mass usage and penetration across the country. UPI has more than 50 crore users, encouraging purchases from vegetables to mobile phones.

The fee proposal has drawn opposition from trade bodies and merchant associations. The Confederation of All India Traders (CAIT), which represents millions of brick-and-mortar retailers, called the postponement "timely and pragmatic".

Payment aggregators and banks are in favour of the fee rollout as it will give them income from UPI transactions.