Ajay Kumar S

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I think MDR on UPI was probably inevitable at some point, especially given how widespread UPI adoption has become. It could also lead to more competition, instead of just three apps accounting for more than 95% of the market. That being said, there are some use cases, like investing and broking, where the proposed MDR structure doesn’t really make sense. The problem with broking is that there is no guarantee that money transferred to a broker will actually result in a transaction. As brokers, we can’t force a customer to trade after transferring money. And if we can’t pass the UPI charge on to the customer, there is essentially no limit to the cost a customer can impose on a broker without generating any revenue. Just as an example, 10,000 customers could each make 50 UPI transfers of ₹2 lakh in a month without executing a single trade. At the proposed MDR, this could potentially cost the broker around ₹2 crore, without generating any business. What makes this even more challenging is quarterly settlement (QS). This is a SEBI regulation that requires brokers to send unused funds back to clients every month or quarter. Most customers then transfer these funds back to their broking accounts, with more than half of these transfers happening through UPI. So regulation essentially forces this movement of money every month or quarter, and the broker could end up bearing the cost when the money comes back, without any incremental benefit or revenue. By the way, we currently don’t charge brokerage on equity delivery trades because the economics allow us to offer them for free. But if every UPI transfer starts carrying an additional cost, irrespective of whether the customer actually trades, I don’t see how we can absorb this indefinitely. I think having an MDR is okay. It still doesn’t solve the problem of customers transferring money without transacting, but something like 0.02% with a cap of ₹5 or ₹10 per transaction seems much more reasonable for broking, instead of a cap as high as ₹300.

Speculation and claims that the MDR will be charged on UPI transactions are completely false, baseless, and misleading. Such baseless and sensation-creating speculations cause needless uncertainty, fear and suspicion among our citizens. The Government remains fully committed to promoting digital payments via UPI.

The introduction of MDR on large-value UPI transactions (i.e., above ₹2,000) is an important step towards strengthening the long-term sustainability of India’s digital payments ecosystem. It will help UPI in continuing to scale, innovate and serve consumers and businesses across the country. A fair and appropriate distribution of MDR across ecosystem participants will support continued investment in technology, infrastructure and acceptance networks. This, in turn, can enable wider UPI acceptance, deepen the customer base and support sustained growth in transaction volumes. Importantly, all UPI transactions - P2P and P2M - shall remain free for users. P2M UPI transactions below ₹2,000 will continue to remain free for merchants, while MDR may be levied on merchants for P2M . RBI remains committed to ensuring that UPI continues to be safe, seamless, affordable, and accessible, while supporting the long-term sustainability and growth of India’s world-class digital payments ecosystem.

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