RBI Guv Malhotra Says ‘Small’ MDR On UPI Won’t Impact Volumes, But Data Shows Mixed Trend

Reserve Bank of India (RBI) Governor Sanjay Malhotra on Wednesday said a “small fee” in the form of merchant discount rate (MDR) is unlikely to have a major impact on Unified Payments Interface (UPI) transaction volumes, with the central bank saying it has not seen any decline in usage so far.

“As of now, we do not see any drop in volumes. And I don't personally think that a small fee will have a major impact on the volumes,” Malhotra told reporters at the RBI headquarters in Mumbai after the October monetary policy review, as per a report by news agency PTI.

Malhotra's remarks come ahead of the rollout of the new MDR framework, under which a 0.4% charge will apply to eligible UPI merchant transactions above ₹2,000 from October 15. The measure was announced in September as part of efforts to support the sustainability of the digital payments ecosystem.

The government has clarified that the charge is not intended to be directly passed on to consumers. Transactions up to ₹2,000 covered by the zero-MDR framework will continue to remain free.

UPI Volumes Show Mixed Trend

The National Payments Corporation of India (NPCI) data show UPI processed 24.06 billion transactions worth ₹29.37 lakh crore in September. Volume was down 1.8% from 24.50 billion transactions in August. The value of transactions also fell 1.5% to ₹29.37 lakh crore in September from ₹29.82 lakh crore in August.

Although September's volume was 1.7% higher than July's 23.65 billion. It was also 7.7% above April's 22.34 billion transactions. The average daily volume rose from 744.89 million in April to 802.28 million in September.

However, NPCI's daily transaction data show UPI activity weakening through September, with transaction volumes falling from a peak of 858.62 million on September 2 to a low of 747.85 million on September 24 before gradually rising towards month-end.

The slowdown was more pronounced in the second half of the month, after the MDR announcement.

At the same time, UPI activity has remained relatively firm in the first six days of October. NPCI data show 5.03 billion transactions during October 1–6, averaging around 837.78 million transactions a day.

Since the new MDR is scheduled to take effect from October 15, the October data cannot yet be used to assess its impact. However, experts have indicated that UPI volumes could change after the MDR rollout. How much of any such change can be attributed to the MDR remains to be seen.