economy · 2026-10-14
UPI fee on big payments delayed till after Diwali
Photo: via Inc42 Media
India's UPI payment system will not charge merchants a fee on big transactions until after Diwali. The delay gives small shops more time before they may have to pay 0.40% on payments above ₹2,000.
Why did the UPI fee get postponed?
The fee was postponed because retailer groups protested and the Supreme Court has yet to settle the matter. The All India Mobile Retailers Association and the All India Consumer Products Distributors Federation withdrew their planned protest after meeting Finance Minister Nirmala Sitharaman, who promised to consider their concerns. NPCI delayed the rollout to avoid burdening merchants during the festive season.
Might there be more such protests after Diwali?
Yes, retailers like AIMRA and AICPDF, which represent mobile and FMCG distributors, have already called off one protest but didn't get firm promises. They still want a phased, lower fee and a higher threshold. If the fee returns unchanged after Diwali, they could revive such protests.
What is the current status of the UPI fee?
The rollout is postponed until after Diwali. Meanwhile, merchants would have paid 0.40% on UPI payments above ₹2,000, capped at ₹300, but the new date is not announced. Transactions under ₹2,000 and person-to-person transfers stay free. The fee proposal itself is unchanged, pending talks and court review.
So nothing is settled and all wait till after Diwali?
Yes, nothing is settled. The UPI merchant fee (0.40% on transactions above ₹2,000) was postponed past Diwali, but no new date is set. The dispute remains: NPCI says fees secure the system, while retailers say they can't afford them. Courts and government are still involved, so the outcome is pending.
How is Diwali spend shaping up for this year?
Diwali spend is cautious. The average UPI transaction has shrunk from ₹1,848 in 2021 to ₹1,313 in 2025 (a figure from the National Payments Corporation of India, which runs UPI), meaning people buy in smaller amounts. With the proposed 0.4% merchant fee on payments above ₹2,000 delayed until after the festival, shops avoid extra costs. Still, thin margins mean any future fee could squeeze them.
How does the UPI fee connect to weak Diwali sales?
A delayed UPI fee is aimed at easing a weak festive season. People are already spending cautiously, with the average UPI transaction dropping from ₹1,848 in 2021 to ₹1,313 in 2025 (per data from the National Payments Corporation of India, which operates UPI). Adding a 0.40% charge on purchases over ₹2,000 now would squeeze retailers and risk dampening Diwali sales further.
What did the Supreme Court say about UPI fees?
The Supreme Court refused to block the government from collecting the fee on UPI merchant transactions, but made no final ruling. It ordered the Centre to respond within four weeks and said the issue was "less legal and more technical." So court challenges remain open, but nothing has been decided.
Why are traders so opposed to the fee?
Retailers work on thin margins. The associations say a 0.40% charge on payments above ₹2,000 could add ₹7,000–9,000 crore in annual costs across FMCG distribution and retail. They want a phased introduction starting at 0.2% and a higher threshold, arguing the fee squeezes shops already coping with smaller UPI ticket sizes, down from ₹1,848 in 2021 to ₹1,313 in 2025 (figures from the National Payments Corporation of India, which runs UPI).
Source: inc42.com