The Reserve Bank of India (RBI) Governor Sanjay Malhotra has said the introduction of a merchant discount rate (MDR) on select UPI transactions is unlikely to significantly affect transaction volumes.

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The new UPI MDR framework will come into effect from October 15. Under the revised system, eligible person-to-merchant (P2M) UPI transactions above ₹2,000 will attract an MDR of 0.4%. For transactions of ₹75,000 and above, the charge will be capped at ₹300.

The fee will be paid by merchants within the digital payments ecosystem. Consumers will continue to use UPI without paying any MDR or additional platform fee. Merchants will also not be permitted to recover the MDR from customers by adding it to their bills.

Transactions of up to ₹2,000, which account for more than 95% of UPI P2M transaction volumes, will remain outside the new charge. Small merchants covered under the P2PM framework will also continue to receive zero-MDR treatment.

For example, a ₹50,000 eligible UPI payment would attract an MDR of ₹200, while a ₹1 lakh transaction would be subject to the ₹300 cap.

The framework is being introduced ahead of the festive season, when high-value purchases such as jewellery, electronics and appliances typically increase.

Malhotra said the RBI has not observed a decline in UPI volumes so far and does not expect the relatively small merchant-side fee to materially weaken usage. Person-to-person UPI transfers will also remain free.