RBI Chief Says Modest UPI Merchant Fee Won't Dent Transaction Volumes

The Reserve Bank of India's governor has sought to reassure stakeholders that upcoming merchant charges on Unified Payments Interface transactions will not significantly affect payment volumes in the country's digital ecosystem.

Effective October 15, a Merchant Discount Rate (MDR) of 0.4% will be levied on select person-to-merchant UPI transactions valued above Rs 2,000. The charge applies to digital payments processed through the real-time gross settlement system.

The central bank chief characterised the fee as modest, suggesting it would not materially discourage merchants or consumers from using UPI for transactions. The comments come as stakeholders assess the implications of the new pricing structure for India's rapidly growing digital payments infrastructure.

UPI has emerged as a cornerstone of India's digital payment landscape, processing billions of transactions annually. The introduction of merchant charges marks a shift in the platform's fee structure, which previously operated on a no-cost basis for most user categories.

The RBI's position reflects efforts to balance the need for sustainable revenue models in digital payments with concerns about maintaining broad-based adoption across merchant segments.