RBI says UPI MDR talks are premature as merchant-fee proposal remains under consideration

A proposed 0.25%-0.4% MDR on business UPI payments above ₹2,000 could alter checkout costs for merchants while opening a revenue stream for banks and payment aggregators. RBI Governor Sanjay Malhotra said discussion is premature amid proposed PSSA amendments.

— Source publishedWed, 5 Aug, 2026, 21:11 IST·First seen Wed, 5 Aug, 2026, 21:25 IST·Source Inc42 · Buzz

What happened

Reserve Bank of India (RBI) · RBI Governor Sanjay Malhotra said discussion on UPI MDR is premature as the government considers PSSA amendments. A proposed fee

Key facts

  • Proposed MDR: 0.25%-0.4% on business UPI transactions above ₹2,000
  • Jefferies estimate: 15-30 bps MDR could generate ₹5,000-₹10,000 crore by FY28
  • UPI volume: 23.66 billion transactions in July, up 4% month-on-month
  • UPI value: ₹29.88 lakh crore in July, up 3% month-on-month
  • Zero MDR for P2M UPI has applied since January 1, 2020

Why this matters

Evaluate partnerships or capabilities in merchant payment routing, reconciliation and value-added services, as any return of MDR could reshape bargaining power across banks, aggregators and large merchants.

What to watch

  • Final text and parliamentary progress of proposed Payment and Settlement Systems Act amendments.
  • RBI, NPCI or government consultation papers specifying whether MDR applies to business accounts, merchant categories, transaction thresholds and QR-based payments.
  • Any commitment to replace or revise government subsidy support for zero-MDR UPI transactions.
  • Statements from the finance ministry on consumer protection, small-merchant exemptions and pass-through restrictions.
  • Merchant-acquirer pricing announcements, especially from major banks, payment aggregators and large commerce platforms.
  • Changes in UPI transaction mix: growth in high-value merchant payments, business-account volumes and card-versus-UPI checkout share.
  • Large merchants should model blended checkout-cost exposure by UPI ticket size, category and payment mix, particularly for transactions above ₹2,000.
  • Payment aggregators and acquiring banks are likely to prepare enterprise merchant tiers combining UPI acceptance with reconciliation, fraud management, loyalty and settlement products.
  • Merchants may steer high-value baskets toward cards, bank transfers, EMI products or lower-cost payment modes if MDR is passed through, subject to regulatory limits on payment-method steering.
  • Banks could increase investment in UPI merchant acquiring, since a defined MDR would improve the economics of onboarding, servicing and securing merchant payment acceptance.
  • Fintechs may accelerate products that monetize around UPI rather than through it, including credit on UPI, working-capital lending, soundboxes, data analytics and settlement services.

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