UPI merchant discount rate unlikely to drive consumers back to cash: RBI

The Reserve Bank of India on Monday dismissed concerns that levying merchant discount rates (MDR) on Unified Payments Interface transactions would reverse India's digital payments momentum, with Deputy Governor S C Murmu asserting that cash would continue to play a secondary role in the financial system.

Murmu said the MDR framework, aimed at helping the digital payments ecosystem recover costs incurred in maintaining infrastructure, addresses a structural gap in India's fintech architecture without fundamentally altering consumer behavior. The charge is expected to be borne primarily by merchants rather than end-users, minimizing friction for the vast majority of UPI users.

The central bank official noted that despite the introduction of MDR, cash would retain its significance as a store of value for specific segments and transactions. However, he emphasized that the primary trajectory of India's payments landscape remains firmly directed toward digital channels, driven by sustained consumer adoption and merchant network expansion.

The remarks come as India's digital payments infrastructure continues to scale rapidly, with UPI processing over 10 billion transactions monthly. Industry analysts have suggested that the MDR implementation could support long-term sustainability of the payments ecosystem by generating revenue streams necessary for infrastructure upgrades and security enhancements.