Stories
Small UPI fee will not hurt transaction volumes, says RBI Governor Sanjay Malhotra
- •RBI Governor Sanjay Malhotra stated that a small merchant discount rate (MDR) on select UPI transactions will not significantly impact overall transaction volumes.
- •NPCI has fixed an MDR of 0.4 percent for eligible digital transactions above Rs 2,000 starting October 15, borne within the merchant ecosystem rather than by consumers.
- •Transactions up to Rs 2,000 and those covered under the zero-MDR framework for small merchants will continue to remain completely free for consumers.
- •Payment companies and fintechs may continue to levy platform and convenience fees for services like utility bills and mobile recharges separately from MDR.
- •The new framework aims to balance the long-term financial sustainability of the digital payments ecosystem with keeping basic UPI usage free for the public.
Key Questions Answered
Under the new framework introduced by NPCI, a Merchant Discount Rate (MDR) of 0.4 percent will apply to eligible digital UPI transactions above Rs 2,000 starting October 15, while transactions up to Rs 2,000 remain free for consumers and small merchants.
No, Reserve Bank of India Governor Sanjay Malhotra stated that a small merchant discount rate on select transactions is unlikely to significantly affect transaction volumes, noting that the central bank does not currently see any drop in usage.
Fintech firms and payment apps levy platform, convenience, or technology fees for services like mobile recharges and bill payments. Industry executives note that these platform fees cover infrastructure costs separate from MDR and are expected to remain compliant and transparent without indirectly recovering MDR from merchants.
