UPI MDR from 15 October: RBI Governor says small fee unlikely to hit transaction volumes

UPI MDR takes effect from 15 October for select merchant transactions above ₹2,000. RBI Governor Sanjay Malhotra said he does not expect the small fee to have a major impact on UPI volumes, while consumers will not be charged.

A small merchant discount rate (MDR) on select Unified Payments Interface (UPI) transactions is unlikely to have a major impact on transaction volumes, Reserve Bank of India (RBI) Governor Sanjay Malhotra said on Wednesday after the October monetary policy review.

Asked whether the introduction of MDR from 15 October could lead to a fall in UPI volumes and whether the RBI could consider bearing the cost for the larger good, Malhotra said a decision on MDR had already been taken.

“As of now, we do not see any drop in volumes, and I don’t personally think that a small fee will have a major impact on the volumes,” he said at the post-policy press conference.

The comments come as UPI is set to move away from its long-standing zero-MDR structure for a limited set of higher-value merchant transactions. The government has said the change is aimed at supporting the long-term sustainability of the digital payments ecosystem without imposing charges on consumers.

What changes for UPI transactions from 15 October

Under the new framework, a 0.4% MDR will apply to specified person-to-merchant (P2M) UPI transactions above ₹2,000. For transactions of ₹75,000 and above, the MDR will be capped at ₹300 per transaction.