Mumbai: Only around 10 per cent of the overall value of UPI transactions could face the risk of merchant discount rate (MDR) costs being passed on to consumers, National Payments Corporation of India (NPCI) managing director and CEO Dilip Asbe said on Thursday.

Speaking at the 13th SBI Banking & Economics Conclave 2026 in Mumbai, Asbe said most of the proposed MDR burden is expected to be absorbed by large businesses that already accept credit cards and factor payment costs into their pricing.

Large businesses expected to account for most MDR

According to Asbe, around 80 per cent of the MDR collected is expected to come from businesses with annual turnover of more than Rs 1,000 crore.

These businesses already accept credit cards, for which merchants typically pay higher charges. Asbe said such companies have generally not offered separate discounts for customers paying through UPI, indicating that they may absorb the proposed UPI-related costs rather than passing them on to consumers.

He said the actual risk of consumers bearing the cost was limited to about 10 per cent of the overall transaction value covered by the framework.

Around 10 per cent of the overall MDR charged to companies with annual turnover of Rs 1 crore and above may also not be passed on to customers, he added.

96% of transaction volume expected to remain unaffected

Asbe said around 96 per cent of UPI transaction volume and 75 per cent of its overall value are currently not expected to attract MDR.

The new framework applies to specified merchant transactions above Rs 2,000, while person-to-person UPI transfers remain free. The Union government has also said payments to merchants up to Rs 2,000 and transactions covered under the zero-MDR framework for small merchants will remain free.

Asbe said India has around 60 million merchants in the UPI ecosystem. About 75 per cent of QR-code merchants had not received even a single transaction above Rs 2,000, according to him.

“There is absolutely no impact of our policy back there,” he said, referring to these merchants.

However, he acknowledged that there remained a possibility of costs being passed on in the remaining segment.

He said banks, NPCI, payment providers and other stakeholders would have to work together to ensure that merchants do not pass the charges back to customers.

MDR framework for selected UPI transactions

The new UPI framework introduces an MDR of 0.4 per cent on specified person-to-merchant transactions above Rs 2,000 from October 15, 2026. MDR is a fee charged to merchants for accepting digital payments and is not directly charged to consumers by NPCI. Person-to-person transactions remain outside the MDR framework.

The government has said the framework is intended to support the long-term sustainability of the UPI payment ecosystem while protecting individuals and small merchants from additional charges.

The introduction of MDR has nevertheless prompted concerns among sections of the business community about whether merchants could eventually recover the cost from customers through higher prices or additional charges.

Asbe’s comments come against that backdrop, with NPCI seeking to emphasise that most merchants and UPI transactions will remain outside the charging framework.

Rs 3,000-crore fund proposed for entrepreneurs

Asbe also said that five per cent of the MDR collection is proposed to be channelled into a fund for young entrepreneurs and areas requiring additional support.

NPCI is working with the Reserve Bank of India and other stakeholders to design the proposed fund, which could reach around Rs 3,000 crore over three years.

The proposed fund would be used to encourage wider UPI acceptance among smaller merchants, including by expanding payment infrastructure such as soundboxes.

India currently has around 60 million active merchants in the UPI ecosystem, while the number of soundboxes is estimated at around 20–25 million, according to Asbe.

The NPCI chief’s comments indicate that the proposed MDR framework is expected to have its largest financial impact on higher-value merchant transactions, while a substantial share of everyday UPI payments will continue without MDR.