NPCI chief says proposed 0.4% UPI merchant fee could generate ₹15,000 crore
What happened
A proposed 0.4% Merchant Discount Rate (MDR) on UPI transactions could generate ₹15,000 crore in its first year, according to the National Payments Corporation of India chief. Under the framework, 96% of transaction volumes remain free. State Bank of India will begin charging MDR on UPI payments exceeding ₹2,000 starting October 15, sharing fee revenue among issuing banks, acquiring banks, payment gateways, and UPI applications.
Why it matters
The generated revenue is earmarked to fund cybersecurity measures and technical infrastructure upgrades across the digital payments ecosystem. For integrated institutions like State Bank of India, which operate across issuing, acquiring, and gateway services, the revenue-sharing model is expected to generate a surplus that offsets high digital processing costs.
Bigger picture
Selective monetization targets higher-value transactions while preserving free access for the vast majority of payments. This approach attempts to build a commercially viable model for payment network participants without dampening widespread consumer digital adoption.
Watch next
Watch for State Bank of India’s fee implementation on October 15 and its operational assessment of user transaction splitting to bypass the fee threshold.