'Someone has to pay': RBI Governor on proposal to levy MDR on UPI payment

RBI Governor Sanjay Malhotra says digital payment infrastructure has costs as the Union government weighs bringing back MDR on high-value UPI merchant transactions

Reserve Bank of India (RBI) Governor Sanjay Malhotra on Wednesday said "someone has to pay the cost" of running India's digital payments infrastructure, adding that the cost of maintaining UPI payments cannot be ignored indefinitely.

 

Malhotra made the remarks during the post-monetary policy press conference. Responding to questions on the proposal to levy a Merchant Discount Rate (MDR) on UPI payments above ₹2,000, he said the central bank's focus remains on making digital payments accessible, affordable, safe and sustainable.

 

“It is very premature to talk right now. The government is still carrying out the amendment. The costs have to be paid by someone. We all want that this public infrastructure should continue to strengthen. Let's wait and watch for further developments on this,” he said.

 

 

“Please keep in mind that ultimately it is the consumer in some way or the other who's paying. So, it may not be the same consumer. It may be the general economy, and you don't get to see it directly,” the RBI Governor added.

 

His remarks come days after the Union government moved to amend the Payment and Settlement Systems Act, paving the way for the possible return of MDR on select UPI merchant transactions after nearly six years of a zero-MDR regime.

 

The government is considering charging 0.25-0.4 per cent MDR on UPI payments above ₹2,000 made to businesses, while keeping person-to-person transfers free. One proposal would apply the levy only to large merchants, shielding small businesses and consumers from additional charges.

 

Industry executives have long argued that the zero-MDR policy has left banks and payment companies without a viable revenue stream even as UPI transaction volumes and infrastructure costs continue to surge, according to Reuters.