RBI says it is premature to decide on MDR charges for UPI merchant payments
RBI Governor Sanjay Malhotra said any move to levy merchant discount rates on UPI is not imminent. The proposed law would enable a charge, but would require legislative approval and separate RBI guidelines; the government currently subsidises low-value payments for small merchants.
What happened
RBI Governor Sanjay Malhotra said it is premature to determine whether UPI merchant payments will face MDR charges. The proposed law enables a possible levy,
Key facts
- ₹2,000
- ₹29.9 lakh crore
- 23.66 billion
- July 2026
Why this matters
Keep UPI-led partnership and acquisition economics intact today, while stress-testing targets and integrations against possible future merchant-payment charges and RBI rulemaking.
What to watch
- Introduction, passage, or withdrawal of the proposed enabling legislation for UPI merchant charges.
- RBI consultation paper or draft guidelines defining merchant categories, transaction thresholds, MDR caps, or exemptions.
- Union Budget or Ministry of Finance announcements on continuation, size, and design of UPI/P2M incentive subsidies.
- NPCI data showing rising UPI transaction volumes alongside deteriorating bank/PSP participation economics, outages, or reduced service investment.
- Any move to distinguish debit-funded UPI, credit-on-UPI, high-value payments, cross-border payments, or large-enterprise merchant acceptance.
- Industry association submissions from banks, acquirers, fintechs, and merchant bodies on payment-cost recovery.
- Payment aggregators should model merchant economics under a zero-MDR base case and a segmented-MDR upside case rather than reprice immediately.
- Large merchants should preserve contractual flexibility in checkout, acquiring, and payment-orchestration agreements for potential UPI fee pass-through or routing changes.
- Banks and PSPs are likely to intensify lobbying for a durable subsidy or alternative revenue pool, citing infrastructure, fraud-control, and customer-service costs.
- Fintechs may prioritize monetizable layers around UPI—credit, reconciliation, loyalty, working-capital loans, and enterprise payment software—over transaction-fee assumptions.
- Small merchants should see no near-term acceptance-cost change, sustaining QR-code acceptance and reducing incentives to steer consumers toward cash or cards.