# Modest Merchant Discount Rate Will Not Dent Digital Volume, Affirms Reserve Bank of India Governor

> Reserve Bank of India Governor Sanjay Malhotra stated that the introduction of a modest merchant discount rate on merchant UPI transactions exceeding 2,000 rupees will not dampen transaction volumes.

**Type:** article · **Category:** Business · **Published:** 2026-10-07 · **Source:** TrendKia
**Canonical:** https://trendkia.com/en/business/dijitala-bhugatana-para-mamuli-mdr-shulka-se-upi-lenadena-ki-raphtara-susta-nahin-hogi-bole-rbi-gavarnara-44618 · **Language:** English
**Tags:** RBI, Sanjay Malhotra, UPI, MDR, NPCI, Banking

Reserve Bank of India Governor Sanjay Malhotra clarified that the introduction of a nominal merchant discount rate on unified payments interface transactions will not disrupt transaction volumes across the country. Speaking after the conclusion of the Monetary Policy Committee deliberations, he pointed out that real-time transaction activity exhibits steady momentum and personal assessments suggest that a minimal fee structure will hardly discourage overall digital payment adoption.

## Merchant Discount Rate Structure and Sustained Credit Growth
The National Payments Corporation of India recently mandated a 0.4 percent merchant discount rate on merchant UPI transactions exceeding 2,000 rupees, billed directly to businesses. This structural charge aims to support the processing infrastructure without placing a direct burden on everyday individual transfers. Alongside digital payment insights, the governor emphasized that bank credit expansion is poised to remain resilient, consistently feeding vitality into macroeconomic activities nationwide.

## Asset Quality Surveillance Across Non-Banking Financial Companies
Addressing the liquidity environment across the financial system, the central bank governor confirmed that regulatory authorities are keenly observing the asset quality dynamics of non-banking financial companies amid abundant funds. Nevertheless, he clarified that the institution does not foresee deteriorating asset portfolios taking shape. The surplus liquidity noted across commercial banks over recent weeks remains a transient phase rather than an enduring feature.

## Deposit Inflows via Foreign Currency Non-Resident Accounts
Highlighting foreign currency dynamics under swap facilities, the governor revealed that mobilizing nearly 133 billion US dollars through the FCNR (B) scheme highlights robust confidence in fundamental domestic economic parameters. The central bank expects banking institutions to allocate and deploy these offshore funds prudently. While turbulent global macro environments have curtailed broad foreign capital inflows, ongoing pressures felt along current account balances represent purely temporary friction.

## External Balance Outlook and Corporate Holding Queries
Expressing confidence regarding external sector metrics, the governor noted that the balance of payments will likely return to a comfortable surplus in the near future. During interactions regarding regulatory compliance directives, he refrained from addressing specific queries regarding the rejection of Tata Sons' surrender plea for its non-banking finance license or mandatory listing guidelines applicable to upper-layer financial conglomerates.

## What this means for you
Merchants handling substantial digital receipts must prepare for transaction charges while retail consumers face no fee burdens.

- **Impact on Retailers:** Merchants receiving UPI transfers above 2,000 rupees must absorb a 0.4 percent merchant discount rate. Business owners should review their operational margins and digital point-of-sale accounting to adjust for this processing cost.
- **Impact on Everyday Users:** Ordinary shoppers conducting routine peer-to-peer or small retail purchases will experience no deductions. Consumers can continue utilizing UPI platforms without concerns about hidden retail transaction fees.
- **Credit Availability:** Sustained credit expansion ensures uninterrupted retail and commercial borrowing pipelines from domestic banks. Borrowers can expect adequate funding channels for personal financing and commercial projects.
- **Foreign Deposit Inflows:** Resilient deposit mobilization from overseas citizens reinforces system-wide liquidity and macro stability. Depositors and domestic institutions benefit from sturdy foreign exchange backstops during global market fluctuations.

## Why this happened
The governor addressed the rationale behind payment system sustainability and broad macroeconomic liquidity following the monetary policy review.

- **Payment Cost Rationalization:** The policy announcement responded to market concerns over whether merchant discount charges on high-value transfers would deter digital adoption. The regulator clarified that volume metrics remain intact despite payment processing levies on large tickets.
- **Liquidity Surveillance:** A temporary build-up of banking liquidity prompted scrutiny regarding aggressive lending and potential asset deterioration within non-banking lenders. The central bank confirmed proactive oversight while ruling out any systemic distress.
- **External Financial Headwinds:** Global market uncertainties softened international capital inflows, creating transient pressures along external trade accounts. Sturdy deposits from overseas residents helped stabilize the balance of payments against foreign volatility.

## Questions & Answers

### 1. Will merchant discount charges on UPI transfers above 2,000 rupees reduce transaction volume?
The RBI governor confirmed that transaction volumes remain healthy and a modest fee is unlikely to cause any significant decline.

### 2. What is the merchant discount rate applicable on commercial UPI transactions?
The NPCI stipulated a 0.4 percent rate on merchant UPI receipts that exceed 2,000 rupees.

### 3. How much foreign capital was mobilized under the FCNR (B) deposit channel?
Approximately 133 billion US dollars was gathered from non-resident Indians under the concessional swap arrangement.

### 4. What response was provided regarding Tata Sons' proposed public listing?
The governor declined to answer queries regarding Tata Sons' license surrender or listing compliance under upper-layer NBFC rules.

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