The National Payments Corporation of India (NPCI) has postponed the implementation of merchant discount rates (MDR) on select Unified Payments Interface (UPI) merchant transactions until immediately after Diwali following opposition from business organisations and protests by shopkeepers against the proposed charges.

The UPI and Services Steering Committee, on Tuesday, decided to defer the implementation citing the festive season. NPCI said the revised implementation date would be notified separately, without specifying when the charges would take effect.

The postponement provides temporary relief to merchants during the festive period, when retail activity and digital payments typically rise. The decision delays the introduction of charges on eligible transactions, but does not signal a withdrawal of the proposed MDR framework.

Under the announced structure, standard UPI person-to-merchant (P2M) transactions above ₹2,000 will attract an MDR of 0.4%, capped at ₹300 per transaction. Transactions up to ₹2,000 and person-to-person transfers will remain exempt. Specified categories, including railways, telecom, insurance, fuel and agricultural inputs, will attract a flat charge of ₹5 per transaction above ₹2,000. Payments involving mutual funds, securities, stockbrokers and dealers will be subject to an MDR of 0.02%, capped at ₹300.

Eligible small merchants receiving up to ₹100,000 a month through UPI QR codes under the person-to-person-merchant classification will continue to be exempt from MDR.

The proposed levy has faced resistance from business associations concerned that additional payment costs could affect merchant margins, particularly for small retailers operating on thin margins. Shopkeepers have also protested against the move, arguing that introducing charges on the widely-used digital payment system could increase their operating costs and complicate transactions.

The government has maintained that the revised structure would affect only a small proportion of merchant transactions, with most payments remaining outside the levy. Banks have also been advised to ensure that merchants do not pass MDR costs on to customers, while UPI application providers will be barred from imposing platform fees or other hidden charges.

NPCI said the charges would be implemented after Diwali on a date to be announced separately.