Govt allays fear of increase in cash transactions, reduction in UPI payments post MDR levy
BusinessLine 2 hrs ago·17 Sept 2026, 1:38 pm
The government has introduced a merchant discount rate (MDR) levy on electronic transactions, sparking concerns that higher fees could push merchants and consumers back to cash and curb UPI usage. The finance minister said the step is intended to protect India’s sovereignty over its electronic payment ecosystem.
For investors, the policy may affect payment processors, banks and fintech firms that depend on strong UPI volumes. Higher transaction costs could compress merchant margins and slow the rapid growth of digital payments, while also potentially increasing revenue for entities that collect the levy.
Watch for details on how the MDR will be applied—whether as a flat fee or percentage, any exemptions, and the reaction from major payment platforms. Tracking UPI transaction trends and cash circulation in the coming weeks will show whether the levy is shifting payment behavior.
Excerpt from BusinessLine
The government on Thursday expressed confidence that UPI volume will not come down after introduction of MDR from October 15. Officials also said that they do not expect heavy cash inflows into the system. In the meantime, Financial Services Department categorically said the introduction of MDR is a step in protecting…Read the original at BusinessLine
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