RBI Deputy Governor Shirish Chandra Murmu said concerns that introducing a Merchant Discount Rate (MDR) on UPI transactions would encourage people to revert to cash payments are unlikely to materialize.
He called the fear of increased cash usage an “initial apprehension,” indicating that the RBI does not expect the new charge to disrupt digital payment adoption significantly.
Starting October 15, 2026 a 0.4% MDR will apply to person-to-merchant UPI transactions above ₹2,000. This charge will be borne by merchants, not consumers, so customers will not directly pay the MDR on these transactions. The MDR will be capped at ₹300 for transactions of ₹75,000 or more.
This setup introduces a cost for merchants on higher-value UPI payments while exempting consumers. The RBI believes this change will not cause a notable shift from UPI to cash, as digital payments continue to be favored for their convenience and ease.
