UPI volumes will largely remain intact despite new MDR rollout: NPCI chief
The new MDR will apply to specified P2M UPI payments above ₹2,000 from October 15, while P2P transfers and smaller merchant payments remain free.
National Payments Corporation of India (NPCI) CEO Dilip Asbe stated on Thursday that the introduction of a new Merchant Discount Rate (MDR) framework for Unified Payments Interface (UPI) transactions is unlikely to significantly affect transaction volumes. Speaking at the 13th SBI Banking & Economics Conclave 2026, Asbe emphasized that the revenues generated from the new structure would be reinvested into the digital payments ecosystem.
He stated that while any change may cause some discomfort, the ecosystem anticipates no major impact on volumes or value, and instead believes the volumes will grow manifold. The new framework, announced by the government and NPCI, will apply a 0.4% MDR to specified person-to-merchant (P2M) UPI transactions above ₹2,000, with a cap of ₹300 for transactions exceeding ₹75,000.
Transactions up to ₹2,000 in both P2P and merchant payments will remain free of charge. Approximately 96% of P2M transactions are expected to remain unaffected by the MDR. Essential sectors such as railways, telecommunications, insurance, fuel, and agricultural inputs will be subject to a flat MDR of ₹5 per transaction for payments above ₹2,000, while capital market transactions will incur an MDR of 0.02% capped at ₹300.
NPCI CEO Asbe noted that the majority of MDR payments will come from merchants already paying charges on credit card transactions, arguing that the cost is already incorporated into their pricing. He also highlighted opportunities for expanding acceptance infrastructure, citing that around 20 million merchants have soundboxes, while an additional 40 million merchants have QR codes but lack the necessary devices.
Concerns that merchants might pass the MDR onto customers were addressed, with Asbe asserting that the ecosystem needs to prevent this from happening, and the government has directed banks not to pass the MDR to consumers. NPCI would remain receptive to feedback and would review the policy based on data, but does not foresee any major changes to the pricing framework.
The CEO also pointed to voice-based and feature-phone payments as areas where additional ecosystem revenue could support further innovation.
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