World · India Bureau
RBI Governor confident MDR levy won't slow UPI growth momentum
The Reserve Bank of India's top official has downplayed concerns that a new merchant discount rate will significantly impact transaction volumes on the country's digital payments platform. The levy takes effect mid-October while preserving zero-cost transfers for small payments.
LSN India ·
RBI Governor Sanjay Malhotra has expressed confidence that the introduction of a merchant discount rate on UPI transactions will not substantially dampen the platform's rapid growth trajectory. The 0.4 per cent charge, set to commence on October 15, represents the central bank's first effort to monetize the widely-used payment system while maintaining affordability for smaller transactions.
Small-value transfers will continue to remain exempt from the levy, a decision aimed at protecting everyday users and supporting financial inclusion objectives. This tiered approach reflects the RBI's balancing act between encouraging merchant participation and ensuring the platform remains accessible to India's broader population.
The confidence expressed by Malhotra is underpinned by the platform's demonstrated resilience and scale. UPI processed an average of 802 million transactions daily in September, underscoring its entrenchment as the preferred digital payment method across the country. The sheer transaction volume suggests that a modest merchant fee is unlikely to disrupt the ecosystem's momentum.
The merchant discount rate has long been a contentious issue within India's fintech sector, with stakeholders debating the appropriate pricing model for sustaining the platform's infrastructure while supporting merchant adoption. The RBI's measured implementation, coupled with exemptions for smaller payments, suggests policymakers are attempting to mitigate potential headwinds while establishing a sustainable revenue model for payment processors.