NPCI CEO Says Misinformation Driving MDR Concerns, Reaffirms 96% of UPI Transactions Will Remain Free

The National Payments Corporation of India’s Managing Director and Chief Executive Officer, Dilip Asbe, on Thursday sought to dispel growing confusion and concern around merchant discount rate (MDR) on UPI transactions, asserting that misinformation has been driving much of the anxiety seen among merchants and users. According to a report by Moneycontrol.com, Asbe clarified that 96 percent of all UPI transactions will continue to remain completely free, and that the recent discussions around MDR relate only to a very small segment of high-value merchant payments. His comments come at a time when digital payment volumes on UPI have reached record highs, with the network routinely processing over 15 billion transactions a month. The NPCI chief’s statement is significant because it directly addresses a wave of social media speculation and messaging claiming that UPI has become a paid service and that all transactions, irrespective of size, will now attract a fee. Asbe stressed that such interpretations are not only incorrect but also potentially harmful to the momentum that India has built in retail digital payments over the last five years. He said that there is a need to separate fact from misrepresentation, especially because UPI is now recognised globally as one of the most affordable and inclusive real-time payment systems in the world. While admitting that some merchant transactions above a threshold would involve an interchange fee, he underlined that small-value transactions, which are overwhelmingly common, are untouched and will remain free of cost for merchants as well as consumers. His comments effectively reiterate the NPCI’s position that digital payments in India must not be seen as an additional burden on the common citizen or on small businesses.

To understand the clarification fully, it is necessary to explain what MDR actually means in the context of digital payments. The merchant discount rate is the fee that a merchant pays to their acquiring bank when a customer pays through a card or digital wallet. In card-based transactions, MDR has historically been borne by merchants, and customers sometimes assume that the charge is passed on to them. In the UPI ecosystem, however, the structure is somewhat different. UPI is built as a public digital infrastructure, and the government and regulators have consistently ensured that basic bank-to-bank payments are free. Asbe’s latest statement reiterates that the payments body is not attempting to introduce a blanket MDR regime on UPI. Instead, what has been introduced is a limited interchange fee, which is a cost paid by the acquiring bank of the merchant to the issuing bank of the customer, and only in cases where the merchant transaction amount exceeds a prescribed limit. This distinction is crucial because an interchange fee is not the same as a charge paid by the end customer from their bank balance. Even for merchants, the interchange is applicable only for those transactions that fall above the threshold and are treated as high-value commercial payments. The NPCI CEO said the widespread impression that all UPI payments will attract charges is a plain misunderstanding of the system. He reiterated that UPI’s proposition of “free, instant and digital” remains intact for the vast majority of users and merchants. The 96 percent figure, according to NPCI’s internal transaction data, represents the share of UPI transactions that are of low value and therefore exempt from any form of MDR or interchange. Only around four percent of transactions, by count, are high-value merchant payments that may attract a modest interchange, and these are mostly from large businesses rather than roadside vendors or small retail shops.

Asbe’s advice should be viewed as a direct response to the misinformation campaign that has been circulating on social media platforms over the past few weeks. Several viral posts have claimed that UPI is no longer free and that every financial transaction through the interface will now invite a charge. Some posts have even asked consumers to switch back to cash or to avoid using UPI, which the NPCI chief flagged as irresponsible and misleading. He said that the NPCI is committed to ensuring a transparent and fair system, and that all policies are made after extensive consultation with stakeholders, including banks, payment service providers, and the Reserve Bank of India. The comments by the NPCI CEO, as reported by Moneycontrol, also highlighted that small merchants, particularly those in Tier II and Tier III cities, as well as micro-enterprises such as tea stall owners, fruit vendors, auto-rickshaw drivers, and local kirana shops, should not be panicked by unverified online content. He assured these merchants that their day-to-day transactions below the prescribed limit are not chargeable and urged them to continue focusing on growing their businesses through digital acceptance. At the same time, he called on payment aggregators, banks, and fintech applications to communicate charges clearly and to ensure that any applicable fee is visibly disclosed to merchants before a transaction is completed. He also stressed that the NPCI would not allow any arbitrary cost to creep into the UPI system, and that the regulator’s overarching philosophy is to keep the cost of digital transactions as close to zero as possible for the common person.

Underlying the clarification is a larger argument about sustainability and viability in the digital payments industry. Asbe explained that banks and payment service providers incur substantial costs in maintaining the UPI infrastructure, including technology development, cybersecurity, fraud management, compliance, and real-time settlement systems. If every single transaction in the payment chain is completely free, the participating financial institutions must absorb those costs, which could eventually undermine the quality and reliability of the network itself. A small interchange fee on a narrow set of high-value merchant transactions is therefore a practical way of ensuring that the ecosystem remains healthy without distressing the ordinary user. Asbe framed this as a balanced approach that protects the poor, small merchant, and individual customer while allowing large-scale commercial users to contribute a modest amount toward the maintenance of the system. This is not unlike the model followed in many developed economies, where instant payment networks charge a fractional interchange to ensure that the participants remain operationally self-sufficient. However, in India, the scale of charge is far lower and the threshold for exemption is much more generous. The NPCI CEO also indicated that the number of transactions that could attract the interchange is not likely to grow substantially, because the threshold is specifically designed to capture only those transactions that are generated by commercial establishments with meaningful daily turnover. This, he said, was a conscious decision taken by the payments body to ensure that the burden of MDR does not shift on to unorganized retail or informal trade, which relies heavily on low-value digital payments.

For the ordinary consumer, the announcements are a reassurance that UPI payments through phone applications such as Google Pay, PhonePe, Paytm, and other banking apps will continue to be free of any direct fee. Asbe clarified that MDR is never deducted from the customer’s account; it is a merchant-side charge, and in any case, the new interchange framework exempts the overwhelming majority of merchant transactions. Consumers should not fear that making a small payment at a local pharmacy or grocery store will now result in a hidden deduction from their balance. The responsibility for any applicable fee, where genuinely applicable, rests with the merchant account holder, not with the individual who is making the payment. At the same time, the NPCI CEO urged customers and merchants to obtain information only from official sources rather than trusting unsubstantiated social media forwards. He specifically cautioned against the misuse of the term “MDR” in online discussions, as it creates a false impression that the entire UPI system has become expensive. In fact, as per the data available with NPCI, 96 percent of UPI transactions are free in every sense of the word. The remaining four percent represent large merchant transactions, often involving substantial ticket sizes, where a small fee is justifiable to ensure the financial viability of the banks handling those payment routes. This nuanced distinction, the CEO believes, is being overlooked due to sensationalised headlines and selective reading of policy documents. He called upon fintech platforms and business correspondents to help spread accurate information and combat misinformation rather than amplify it for engagement.

Looking forward, the issue of MDR and UPI is likely to remain a sensitive subject because trust is the foundation of digital payments. India has achieved remarkable feats in the past few years, transitioning millions of citizens from cash transactions to digital rails, and much of that has been possible because users believe in the fairness and low cost of the system. Asbe’s latest remarks, as captured in the Moneycontrol report, are a recognition of that trust and an attempt to protect it from unnecessary erosion. He did not deny that there is a need for revenue generation in the payments ecosystem, but he was categorical that this cannot come by taxing small-value transactions. He also hinted that the NPCI and the regulator will continue to monitor the implementation of the interchange framework and will make adjustments if data shows that the burden is falling disproportionately on any particular class of merchants. The ultimate goal, he said, is to ensure that UPI remains a world-class digital public good, available to every Indian, no matter how small the transaction. In that sense, the debate around MDR is a healthy reminder that any successful payments system must balance affordability with viability. But it also shows how quickly false narratives can distort a well-designed policy. As the dust settles, the key takeaway from the NPCI CEO’s statement is simple: UPI is not becoming paid, 96 percent of transactions will remain entirely free, and the small fees that do apply are limited to high-value merchant payments only. The task ahead, according to Asbe, is not to change the mechanism but to fix the misinformation around it and ensure clear communication with every stakeholder. That, he concluded, is the only way to keep digital payments truly inclusive in India.