NPCI Has Deferred The UPI Charge Two Days Before It Was Due To Start

NPCI has deferred the introduction of a merchant discount rate on select UPI transactions until after Diwali, two days before it was due to take effect.

The decision was taken by the UPI and Services Steering Committee on 13 October, with the festive season cited as the reason. The framework had been scheduled to begin on 15 October. A revised implementation date will be notified separately.

Under the framework announced on 15 September, a 0.4 per cent charge applies to eligible person-to-merchant transactions above ₹2,000, capped at ₹300 for payments of ₹75,000 and above. Transactions above ₹2,000 in railways, telecommunications, insurance, fuel and agricultural inputs attract a flat ₹5, while capital market transactions carry 0.02 per cent capped at ₹300.

Person-to-person transfers and merchant payments up to ₹2,000 remain free, as do small merchants covered by the person-to-person merchant framework. The government has said around 96 per cent of merchant transactions are unaffected, and merchants are not permitted to pass the charge on to customers.

NPCI has said the framework is intended to support the sustainability of the UPI ecosystem and fund investment in payment infrastructure, security and merchant acceptance networks, with the charges distributed among participants rather than collected as a tax.

The Supreme Court declined to stay the rollout on 28 September while issuing notices to the Centre, the Reserve Bank and NPCI, with responses due within four weeks. UPI processed 24.07 billion transactions worth ₹29.37 lakh crore in September.

The timing of the reason given does not quite work, and that is the most interesting thing about this.

The festive season was not a surprise. Diwali's date has been known for years, the framework was announced on 15 September with a 15 October start, and whoever chose that date did so with the calendar in front of them. A deferral announced on 13 October citing a festival that was already in view when the date was set is a reason that explains the decision without explaining the delay in making it.

What changed in the intervening month is that the framework was tested. The Supreme Court declined to stay it on 28 September but issued notices to the Centre, the RBI and NPCI, with responses due inside four weeks. Justice Bagchi asked what the character of the charge actually is, if it is not a fee. Those responses are due around now.

A regulator that is confident holds the date and lets the litigation proceed in parallel. One that would rather not have a contested charge live while it files its reply has an obvious reason to wait, and the festive season is a defensible thing to say while doing so.

None of which means the framework is in trouble. It may well start in November exactly as drafted. But a start date that moves once, days before it arrives, tells merchants and aggregators something about how firm the next one will be.

For the companies that have been preparing, a deferral without a date is the least useful outcome.

Payment aggregators and banks have built billing logic, settlement changes and merchant communications against 15 October. None of that gets unwound, and all of it now sits ready against a date nobody has. Merchant contracts that referenced the start, and the pricing conversations that go with them, have to be reopened without being able to say when.

PhonePe and Google Pay together handle more than three-quarters of UPI volume and over 80 per cent of value, and this would have been their first transaction revenue from person-to-merchant payments. A delay of a few weeks is immaterial to companies of that size in any single quarter. What matters more is that the start date has now moved once, which makes a second move easier to contemplate.

The sector exposure is worth noting too. The flat ₹5 band covers railways, telecom, insurance, fuel and agricultural inputs, which are precisely the categories where ticket sizes cluster above ₹2,000 and margins are thin. Insurance premiums paid by UPI would attract ₹5 regardless of size, which is a negligible cost on a ₹50,000 annual premium and a meaningful one on a ₹2,500 monthly instalment.

That design detail has had almost no scrutiny because attention has been on the 0.4 per cent headline. The extra weeks are an opportunity to look at it.

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