Paying Rs 5,000 by UPI after Oct 15? Who pays new charge and what RBI governor said today

**UPI MDR From October 15**

The National Payments Corporation of India has decided to levy a merchant discount rate on certain Unified Payments Interface transactions, a change that takes effect on October 15. Under the framework, an MDR of 0.4% will apply to select high-value person-to-merchant transactions above Rs 2,000. For transactions of Rs 75,000 and above, the charge is capped at Rs 300. The MDR will be borne by merchants in the digital payment ecosystem, not by consumers, who will not be charged directly.

**Why It Matters For Businesses**

For merchants, the shift introduces a processing cost on a segment of UPI transactions that was previously free, which may require review of payment reconciliation and cost accounting. The distinction between payer and payee is central to the policy: consumers face no direct levy, while merchants absorb the fee. The RBI Governor, Sanjay Malhotra, said a decision on UPI-MDR has already been taken and that no drop in UPI volumes has been observed so far. He added that he does not personally expect a small fee to significantly affect volumes. The government has created the legal framework for the payments system, while the NPCI has introduced the current MDR structure under it.

**What To Watch Next**

The RBI's position rests on the view that UPI's scale and convenience will outweigh the effect of the new charge, and recent data offers partial support. UPI transaction volumes grew 22.2% in the second quarter of 2026-27, slower than the 24.2% growth in the first quarter. Bankers said the fact that consumers will not bear the charge directly could limit any immediate impact on usage, though merchants remain at the centre of the framework and their response to the added processing cost will shape the eventual outcome. The real test begins after October 15, when the framework moves from announcement to actual transactions. If volumes stay resilient, the MDR may prove a limited adjustment; if growth weakens sharply, the decisi…