The government may postpone the introduction of a 0.4% fee on Unified Payments Interface (UPI) merchant transactions exceeding ₹2,000, following objections from retailers and concerns over its impact on festive-season spending.
The charge, originally scheduled to take effect on October 15, could be deferred until January 2027, it is learnt. The National Payments Corporation of India (NPCI), which operates UPI, has yet to take a final decision. An announcement is expected in the coming days.
For small businesses in Keralam, particularly retailers relying heavily on QR-code payments, the proposed delay could provide additional time to understand the exemptions and prepare for any changes in payment-processing costs.
The proposed postponement comes less than a month after authorities announced plans to introduce merchant charges on higher-value UPI payments, marking a significant shift from the zero-fee framework that has supported the rapid growth of India's digital payments ecosystem.
The timing of the proposed fee has emerged as a major concern for retailers. Its October 15 implementation would coincide with the festive shopping season, when spending on consumer electronics, clothing, jewellery, household appliances and other goods typically increases.
Businesses fear that the additional transaction cost could affect their margins, particularly in sectors where competition is intense.
A delay until January would allow merchants to complete the peak shopping period without immediately absorbing the new charge.
It would also give banks and payment service providers additional time to modify their systems and work out arrangements to prevent the cost from being passed on to consumers.
Under the framework announced in September, merchants would face a 0.4% merchant discount rate (MDR) on eligible UPI transactions exceeding ₹2,000.
MDR is the fee charged to merchants for processing digital payments. It helps compensate payment service providers and other participants in the transaction-processing network.
The proposed fee would add a new cost for businesses accepting qualifying UPI payments. It is not a charge directly imposed on customers making ordinary UPI transfers.
The policy has faced opposition from retailers and a major brokerage, raising concerns about its possible impact on businesses and digital payment adoption.
Reports of a possible delay triggered selling in shares of listed digital payment companies on October 8, as investors reassessed the prospect of additional fee-related revenue.
Paytm's parent One97 Communications declined 5.5%, while One MobiKwik Systems fell 7%. Pine Labs shares slipped 3%.
These companies were expected to benefit from the introduction of merchant charges. A postponement would push back the potential revenue opportunity and prolong uncertainty over the implementation framework.
The share-price declines reflected the market's immediate reaction to the reported policy rethink rather than a formally announced regulatory change.
UPI has become central to everyday transactions across India, from small purchases at neighbourhood shops to expensive consumer products.
The platform serves more than 50 crore users, making any change in its pricing framework important for merchants, payment companies and consumers.
PhonePe, owned by Walmart, and Google Pay, operated by Alphabet, together accounted for approximately 80% of the value of UPI transactions in August 2026.
The dominance of these platforms also highlights the commercial significance of introducing a sustainable fee structure for the payments ecosystem.
The NPCI is expected to decide whether to retain the October 15 implementation date or postpone the rollout. A January launch remains a possibility rather than a confirmed schedule.
For retailers, the immediate issue is whether the additional payment-processing cost can be avoided during the festive season. For payment companies, the decision will determine when they can begin benefiting from the proposed merchant fee.
The larger policy challenge is to establish a viable revenue model for India's digital payments infrastructure without weakening the affordability and convenience that have made UPI widely popular.
However, until NPCI announces its decision, the existing October 15 implementation schedule remains unchanged.