Small MDR fee unlikely to hit UPI volumes, says RBI Governor Sanjay Malhotra on UPI-MDR charges from Oct 15

RBI Governor Sanjay Malhotra has said a modest merchant discount rate is unlikely to materially reduce UPI usage. Under the framework taking effect on October 15, eligible person to merchant UPI payments above Rs 2,000 will attract a 0.4% charge. Consumers will not pay the MDR, leaving the direct cost with the merchant side of the transaction. The available details do not specify which merchant categories qualify, how the fee will be shared across payment participants, or whether any exemptions apply beyond the stated threshold.

For Indian markets, the immediate exposure lies with listed banks, payment companies and consumer facing merchants that accept UPI. A merchant borne fee may improve payment economics for banks and service providers if transaction volumes remain steady, but it could marginally raise acceptance costs for retailers and other merchants on qualifying payments. Because consumers remain insulated, usage may prove less sensitive than under a customer charge, supporting the Governor's assessment. Stable UPI transaction counts and values after October 15 would confirm that view. A visible slowdown, merchant resistance, or migration toward alternative payment modes would weaken it.