The newly introduced Merchant Discount Rate (MDR) framework for Unified Payments Interface (UPI) transactions is unlikely to have any major impact on transaction volumes, National Payments Corporation of India (NPCI) Managing Director and CEO Dilip Asbe said on Thursday, stressing that revenues generated through the new structure would support further investment in the digital payments ecosystem.
Speaking at the 13th SBI Banking & Economics Conclave 2026, Asbe said the ecosystem would “invest back into the ecosystem”, including in technologies such as soundboxes and artificial intelligence-based solutions.
“Any change will create some pain, but we believe that as of now, we don't foresee any major impact on the volumes or value. In fact, it will grow manifold because the ecosystem will push back,” Asbe said.
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Under the new framework announced by the government and NPCI, a 0.4 per cent MDR will apply from October 15 to specified person-to-merchant (P2M) UPI transactions above ₹2,000, with the charge capped at ₹300 for transactions of ₹75,000 and above. P2P transactions and merchant payments up to ₹2,000 will remain free, while small merchants covered under the zero-MDR framework will also be exempt. About 96 per cent of P2M transactions are expected to remain unaffected
Certain essential and thin-margin sectors, including railways, telecommunications, insurance, fuel and agricultural inputs, will attract a flat MDR of ₹5 per transaction for payments above ₹2,000. Capital market transactions will carry an MDR of 0.02 per cent, capped at ₹300.
{{/usCountry}}Certain essential and thin-margin sectors, including railways, telecommunications, insurance, fuel and agricultural inputs, will attract a flat MDR of ₹5 per transaction for payments above ₹2,000. Capital market transactions will carry an MDR of 0.02 per cent, capped at ₹300.
{{/usCountry}}Asbe said the bulk of MDR payments would come from existing merchants that already pay charges on credit card transactions, arguing that the cost is already embedded in their pricing.
Also read: Govt preparing system to ensure UPI fee doesn't hit customers: Report
He also highlighted the scope for expanding acceptance infrastructure, noting that while around 20 million merchants have soundboxes, another 40 million merchants have QR codes without the devices.
On concerns that merchants could pass the MDR burden to customers, Asbe said the ecosystem would need to ensure that charges were not transferred to consumers. The government has also directed banks to ensure that MDR is not passed on to customers.
Asbe said NPCI would remain open to feedback and would review the policy based on data, while not anticipating any major changes to the pricing framework. He also pointed to investments in voice-based and feature-phone payments as areas where the additional ecosystem revenue could support further innovation.