State Bank of India Chairman C S Setty backed the planned UPI MDR, a small merchant discount rate on select merchant payments, on Monday, October 26, saying it would help banks pay for the computing and fraud monitoring that rising transaction volumes require. He spoke at the Business Standard BFSI Insight Summit in Mumbai.
Setty said SBI alone handles almost 400 million financial and non-financial UPI transactions a day and monitors many payments above ₹5,000 in real time. Without adequate economic incentives, he said, the system may struggle to fund the infrastructure it needs. On the risk that merchants pass the fee to shoppers, he called for tighter service-level agreements with merchants, better grievance redressal and transaction-level monitoring. SBI is working with NPCI, merchants and acquirers on a model to keep the cost off consumers as far as is technically possible, he said.
NPCI’s UPI and Services Steering Committee deferred the fee, first due on October 15, until immediately after Diwali, at a date still to be notified. Trader groups are pressing for a January 1, 2027 start, ABP Live reported.
- Rate: 0.4% on eligible merchant payments above ₹2,000, capped at ₹300
- Flat ₹5 a transaction for categories including bill payments, fuel and education
- Payments of ₹2,000 or less: no fee
Why it matters: UPI merchant payments have carried no MDR, so banks and payment apps have absorbed the cost of a system that now handles more than 2,400 crore transactions a month. Public support from the country’s largest bank adds weight to the case for a fee just as NPCI picks a new date. How banks stop merchants adding the charge at the till will decide whether shoppers notice the change at all.
Source: Business Standard; NPCI, October 13, 2026; ABP Live; Moneycontrol
Image: Ganesh Dhamodkar, CC BY-SA 4.0, via Wikimedia Commons
