Starting October 15, a 0.4% fee will apply to merchant UPI payments over Rs 2,000. RBI Deputy Governor Shirish Chandra Murmu stated this cost-recovery measure will not discourage digital adoption. Investors may track how this change impacts merchant adoption and retail business margins.
Starting October 15, 2026, a 0.4% Merchant Discount Rate will be applied to UPI payments made by customers to merchants that exceed Rs 2,000. The fee is capped at Rs 300 for transactions of Rs 75,000 or higher. The Reserve Bank of India has clarified that this charge is a cost-recovery mechanism for the payment ecosystem and is to be borne by merchants, not the individual consumers making the payment.
RBI Deputy Governor Shirish Chandra Murmu addressed concerns that this fee might push merchants or users back to using cash. He emphasized that the move is a technical adjustment in cost recovery rather than a change in policy meant to restrict digital payments. According to the central bank, the convenience and speed of UPI will ensure that digital transaction volumes remain high despite the new fee structure.
There has been recent discussion regarding a so-called cash paradox in India, where both digital transaction volumes and physical currency in circulation are increasing simultaneously. The central bank views this as a standard economic development rather than a contradiction. Cash continues to serve as both a store of value and a medium for certain types of trade, while digital payments are increasingly preferred for retail and daily transactions. The RBI continues to monitor both metrics as part of the country's economic growth.
On the administrative front, the Deputy Governor touched upon the volume of regulatory circulars, which surpassed 600 over the past year. He explained that this increase was necessary due to the reclassification of regulated entities into 11 distinct categories, which essentially streamlined the compliance process by centralizing document requirements for firms. This reclassification is intended to simplify operations for individual companies in the long run.
Regarding the integration of artificial intelligence in financial services, the central bank maintained a strict stance on accountability. Institutional boards remain fully responsible for governance, regardless of how much machine automation or AI is used within their operations. The RBI signaled that technology does not shift liability away from top-level management.
For investors and market participants, the key monitorable will be how merchants react to the new fee structure. Small businesses that operate on thin profit margins may evaluate the cost of processing digital payments against other payment methods. Additionally, shareholders in fintech companies and payment aggregators may watch whether this fee structure changes the volume of merchant adoption on their platforms in the coming quarters.