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Our read
UPI is likely to see its 0.40% merchant fee cut or delayed before the 15 October start.
For operators
Retailers should model checkout costs on tickets above Rs 2,000 at both 0.40% and the proposed 0.08% before the 15 October 2026 MDR start date, and hold off on surcharges or price changes until the IIT-Bombay proposal and the trade bodies' rollback push are resolved.
Watch
A notification setting UPI MDR below 0.40% before 15 October 2026 would mean the report is shaping policy and merchants above ₹2,000 face a lighter fee.
The report, : IIT-Bombay report urges UPI MDR cut to 0.08% from 0.40% as merchant fee start date of 15 October nears
An IIT-Bombay report recommends cutting UPI MDR to 0.08% from 0.40%, with banks funding UPI from CASA earnings instead. The MDR on merchant transactions above Rs 2,000 is scheduled to take effect from 15 October 2026, and trade bodies want it rolled back.
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Reported figures
From the report. Source details below
| Recommended MDR for TPAPs: | 0.06% |
|---|---|
| PSP share of MDR retained: | 0.02% |
| Banks' CASA net interest margin in FY26: | Rs 4.85 lakh crore |
| Suggested bank set-aside for UPI: | Rs 15,000 crore |
| Transaction charge cap questioned: | Rs 300 |
What to watch next
- Any official statement on the report's 0.08% proposal
- Bank commentary on the ₹15,000 crore set-aside from CASA earnings
- Trade-body petitions or meetings seeking rollback of the fee
- Third-party apps' public response to the proposed 0.06% share
Likely next moves
Our read of what comes next — analysis, not reported by the source.
- Trade bodies are likely to cite the IIT-Bombay report in their push for a full rollback of the merchant fee before 15 October.
- The government and the payments regulator are likely to signal a review or a revised fee structure instead of letting 0.40% start unchanged.
- Banks may resist funding UPI through the ₹15,000 crore set-aside from CASA earnings, arguing the cost should be shared more widely.
- Third-party payment apps may argue that a 0.06% share is too thin to cover their costs, while PSP banks defend their 0.02% share.
- Large merchants are likely to prepare to pass on or absorb any fee on transactions above ₹2,000, and to lobby for the lower rate.