UPI Volumes Will Largely Remain Intact Despite New MDR Rollout: NPCI Chief

New Delhi: The introduction of a new Merchant Discount Rate (MDR) on selected Unified Payments Interface (UPI) transactions is unlikely to have a major impact on the volume or value of digital payments, NPCI Managing Director and CEO Dilip Asbe said on Thursday.

Speaking at the 13th SBI Banking & Economics Conclave 2026, Asbe said the additional revenue generated through the revised framework would be reinvested in the digital payments ecosystem, including technologies such as soundboxes and artificial intelligence-based solutions.

NPCI expects UPI growth to continue

Asbe said that while any change in the pricing structure could create some adjustment for businesses, NPCI does not currently expect a significant impact on UPI volumes or transaction value.

He said the ecosystem would continue to expand and that revenues generated under the new framework could be used to strengthen payment infrastructure and develop new technologies.

The comments come ahead of the October 15 implementation of the revised MDR framework, which marks a shift from the zero-MDR model that has been a defining feature of UPI payments.

What changes from October 15?

Under the new framework, a 0.4% MDR will apply to specified person-to-merchant (P2M) UPI transactions above ₹2,000.

The charge will be capped at ₹300 for transactions of ₹75,000 and above.

However, the revised system does not apply universally to UPI payments. Person-to-person (P2P) transactions will remain completely free, irrespective of the amount transferred.

Merchant payments of up to ₹2,000 will also remain outside the MDR framework. The government has said transactions covered under the zero-MDR framework for eligible small merchants will continue to remain free.

Around 96% of merchant transactions expected to remain unaffected

The government has estimated that approximately 96% of P2M UPI transactions will remain unaffected by the new MDR framework.

The policy is therefore targeted primarily at specified higher-value merchant transactions rather than everyday low-value UPI payments.

Certain essential and thin-margin sectors will also have a separate pricing structure. These include railways, telecommunications, insurance, fuel and agricultural inputs, where payments above ₹2,000 will attract a flat MDR of ₹5 per transaction. Capital-market transactions will carry an MDR of 0.02%, capped at ₹300.

NPCI says revenue will support digital payment infrastructure

Asbe said the additional revenue would be channelled back into the broader digital-payment ecosystem.

One area highlighted by NPCI is the expansion of payment acceptance infrastructure. According to Asbe, around 20 million merchants currently have soundboxes, while another 40 million merchants have QR codes but do not have soundboxes.

The additional resources could also support technologies involving voice-based payments and feature-phone transactions, alongside AI-based solutions.

Will customers have to pay the UPI fee?

A key concern surrounding the MDR rollout has been whether merchants could transfer the cost to consumers.

Asbe said the ecosystem would need to ensure that the MDR burden is not passed on to customers.

The government has also directed banks to ensure that merchants do not separately recover the MDR from consumers. The MDR itself is a charge within the payment ecosystem and is not a government tax collected from UPI users.

UPI moves from subsidy-led model towards ecosystem revenue

The revised MDR framework represents a change in the economics of India's digital payments system.

The government has argued that maintaining a zero-MDR environment indefinitely requires substantial support for the payment ecosystem, while the new structure is intended to create a revenue mechanism for selected transactions without imposing charges on ordinary users and small merchants.

Reuters has reported that the change could generate significant revenue for payment platforms, while also raising questions about competition and market concentration in India's UPI ecosystem.

NPCI to review the framework based on data

Asbe said NPCI would remain open to feedback and would review the framework based on actual data after implementation.

For now, he said the organisation does not anticipate major changes to the pricing structure.

The key question after October 15 will be how merchants respond to the new MDR, whether transaction behaviour changes and whether the additional revenue translates into greater investment in payment infrastructure.

For consumers, the immediate framework means that P2P UPI payments remain free and most merchant transactions remain outside the new MDR, while specified higher-value merchant payments will carry the new charge.