UPI transaction volumes rose 23.5% to 92 billion in April-July FY27, down from 33.5% growth in the year-ago period
The slowdown comes as fintechs and banks argue that zero MDR has limited investment in customer and merchant acquisition
The Lok Sabha's passage of the Taxation and Other Laws (Amendment) Bill, 2026, could facilitate an MDR regime for certain UPI transactions
UPI Volume Growth Slows In FY27 Amid MDR Debate
Fintech and payments industry players have argued that the absence of MDR has constrained the ability of banks, payment firms and fintechs to invest in customer acquisition and merchant expansion
UPI
Summary
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UPI transaction volumes grew 23.5% in the first four months of FY27, marking a sharp slowdown from the 33.5% growth recorded in the corresponding period a year earlier, even as the debate over introducing a Merchant Discount Rate (MDR) on large-value transactions gains momentum.
According to data from the National Payments Corporation of India (NPCI), UPI processed 92 billion transactions between April and July of FY27, compared with 74.5 billion transactions in the same period of FY26, as per Moneycontrol.
The latest figures underline a continuing moderation in UPI's volume growth. The platform recorded nearly 30% year-on-year volume growth in FY26, following 41% growth in FY25.
While full-year and four-month growth rates are not directly comparable, the data indicate that the pace of expansion has weakened over the past two years.
The slowdown comes as the government considers changes to the zero-MDR regime that has been in place since 2020.
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MDR is the fee paid by merchants to banks and payment service providers for processing digital transactions.
Fintech and payments industry players have argued that the absence of MDR has constrained the ability of banks, payment firms and fintechs to invest in customer acquisition and merchant expansion.
MDR Debate Intensifies
At the same time, proponents of retaining zero MDR contend that UPI is digital public infrastructure, similar to Aadhaar, and that keeping transactions free could support adoption among newer users.
The Taxation and Other Laws (Amendment) Bill, 2026, passed by the Lok Sabha on August 6, could pave the way for an MDR on UPI.
The government was considering an MDR of 0.25% to 0.30% on high-value transactions involving large merchants, as per a report by Moneycontrol.
Despite slower volume growth, UPI's transaction value growth has marginally improved, rising to 20% in the first four months of FY27 from 18.5% in FY26.
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UPI currently accounts for around 88% of India's digital transactions, processing more than 23 billion transactions worth nearly ₹30 lakh crore every month, as per Moneycontrol.