MDR a small fee, will not have major impact on UPI volumes: RBI Governor

RBI Governor Sanjay Malhotra. File picture

Reserve Bank of India (RBI) Governor Sanjay Malhotra on Wednesday said the merchant discount rate (MDR) will not have a "major impact" on UPI transaction volumes, according to news agency PTI.

"As of now, we do not see any drop in volumes. And I don't personally think that a small fee will have a major impact on the volumes," he told reporters.

Last month, the government had introduced a 0.4 per cent charge on Unified Payments Interface (UPI) transactions above Rs 2,000 from October 15, thus ending nearly six years of fully free UPI payments. It had capped the fee at Rs 300 for payments of Rs 75,000 and above.

Railways, fuel, telecom, bill payments and insurance have a flat fee of Rs 5 per transaction above Rs 2,000. Payments into mutual funds, securities and through stockbrokers and dealers will attract 0.02 per cent MDR, capped at Rs 300.

RBI says bank credit growth to remain strong

Malhotra said banks' credit growth will continue to be strong going forward and will continue to support the broader economic activity.

While the RBI is conscious of adverse impact on asset quality at non-banking financial firms amid surplus liquidity, he clarified that the regulator does not expect any such eventuality playing out.

The system liquidity will not be in such a high surplus as seen in the last few weeks for a very long time, he added.

He added that the FCNR(B) scheme, where banks raised nearly USD 133 billion in deposits under a concessional swap facility, reflects the strong macroeconomic fundamentals of India, adding that the RBI is confident that banks will deploy the funds prudently.

Balance of Payments expected to record surplus

The RBI Governor further said external headwinds have resulted in a dip in flows and added that the pressure on the current account is a temporary issue.

The current account deficit widened in July due to a higher merchandise trade deficit. India's merchandise trade deficit increased to USD 58.7 billion during July-August 2026 from USD 55.1 billion in July-August 2025, mainly driven by imports of electronic goods and crude oil.

He expects the Balance of Payments would soon return to surplus.

Malhotra refuses to answer questions related to Tata Sons

Malhotra, however, declined to answer any question pertaining to the RBI rejecting Tata Sons' request for surrendering its NBFC licence.

Tata Sons, the holding company of the USD 180-billion revenue Tata conglomerate, had sought de-registration in March 2024 after becoming debt free to avoid the listing requirement that applies to upper layer non banking financial companies (NBFCs).

However, the regulator's decision means the holding company faces the mandatory listing. Tata Trusts the majority shareholder in Tata Sons wants the company to remain private and has urged the Board to explore other options apart from listing.

(With inputs from PTI)