RBI Governor calls UPI merchant-fee talks premature as payments law changes advance

RBI Governor Sanjay Malhotra said discussion of merchant discount rates on UPI is premature while payment-law amendments are under way. Proposals reportedly include fees on transactions above Rs 2,000 or for larger merchants, potentially raising acceptance costs if adopted.

— Source publishedThu, 6 Aug, 2026, 13:53 IST·First seen Thu, 6 Aug, 2026, 14:18 IST·Source Medianama

What happened

Reserve Bank of India (RBI) · RBI Governor Sanjay Malhotra called UPI MDR discussions premature as the government amends payments law. Proposed merchant fees

Key facts

  • MDR of 0.3-0.5% proposed on UPI transactions above Rs 2,000
  • Merchant annual-turnover threshold of Rs 1.5 crore under consideration
  • Transactions above Rs 2,000 were 4% of merchant-payment volumes and 67% of value in FY26
  • Potential MDR revenue pool of Rs 5,000-10,000 crore by FY28
  • Government incentive support is 11% of industry cost and 14% of potential MDR

Why this matters

Potential UPI fee reform raises the strategic value of merchant-acquiring, payments infrastructure, and cost-optimization partnerships serving high-volume retailers.

What to watch

  • Publication of draft payment-law amendments, explanatory memoranda, and any RBI or Ministry of Finance consultation language on MDR authority.
  • Specific definitions of 'large merchant,' annual turnover thresholds, transaction-value thresholds, fee caps, and exemptions for essential categories.
  • Government budget or policy announcements on UPI incentive/reimbursement funding for banks and payment service providers.
  • NPCI, RBI, banking-industry, and merchant-association statements on UPI cost recovery, interoperability, and merchant acceptance economics.
  • Changes in UPI transaction mix: rising average ticket sizes, organized-retail share, credit-on-UPI adoption, and merchant complaints about settlement or service charges.
  • Model payment-cost exposure by UPI ticket size, store format, merchant entity turnover, and category margin; isolate transactions that could fall above a Rs 2,000 threshold.
  • Review payment-routing contracts with banks, acquirers, and PSPs for MDR-change, repricing, data-access, and settlement-service clauses.
  • Prepare checkout steering options that preserve conversion: bank-account-linked offers, retailer loyalty rewards, cash incentives where appropriate, and low-cost payment acceptance alternatives.
  • Avoid assuming small sellers will face immediate fees; prioritize contingency planning for large-format, marketplace, and high-volume merchant entities.
  • Assess whether a fee would be passed through via product pricing, delivery fees, minimum order values, or supplier-funded promotions, especially in grocery, fuel-adjacent, and low-margin retail.

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