The story so far: After much speculation and debate, the National Payments Corporation of India (NPCI) has finally released its circular about the additional charges it will allow to be levied on certain UPI payments from October 15, 2026. While the Opposition has argued that this charge will increase prices for consumers, the government has argued that this will not happen, and that even the impact on merchants will be minimal. 

Who will have to pay the MDR charge?

The Hindu has previously explained what the MDR charge is, in the context of UPI. In short, it is a fee for using UPI that will be paid by merchants to payment processors and banks. Consumers will not have to directly pay the MDR. 

In its press release relating to the NPCI’s announcement, the Ministry of Finance on Tuesday (September 15, 2026) emphasised that banks have been advised to ensure that merchants do not pass MDR charges on to customers and that UPI application providers are expressly prohibited from imposing platform fees or hidden charges on users.

The MDR will have to be paid by mid- to large-sized merchants who receive UPI payments in excess of ₹2,000 per transaction. These merchants will have to pay a charge of 0.4%. For transactions of ₹75,000 and above, the MDR will be capped at ₹300 per transaction.

However, the rules change when it comes to essential sectors. Transactions of ₹2,000 or more in essential and thin-margin sectors, such as railways, telecommunications, insurance, fuel, and agricultural inputs, will attract a flat MDR of ₹5 per transaction. 

According to the government, this flat charge will provide cost certainty for critical public services and businesses operating on narrow margins.

Further, capital market transactions such as payments to mutual funds, stockbrokers, dealers, and for equities will attract an MDR of 0.02%, capped at ₹300 per transaction. This lower rate, the government has argued, is aimed at supporting retail participation in formal financial markets.

One way to ascertain how widespread the charge will be is to look at the volumes of UPI transactions. An analysis by The Hindu of data provided by the NPCI shows that person-to-merchant (P2M) transactions above ₹2,000 make up just 2.5% of all UPI transactions by volume.  

Who will not have to pay the MDR charge?

All Person-to-Person (P2P) transactions will remain free of charge, regardless of the amount being transferred. The government has specified that “no transaction fee, platform fee or other charge may be imposed on individuals for sending or receiving money through UPI”. 

This is a significant exemption because P2P UPI transactions make up about 37% of the total UPI transaction volume.

Further, payments to merchants up to ₹2,000 will remain free of MDR. This makes up another 60.5% of all UPI transactions by volume. That means, in total, 97.5% of all UPI transactions will remain free. 

In addition, the NPCI has mandated that small merchants including street vendors receiving up to ₹1 lakh per month through UPI QR codes under the Person-to-Person-Merchant (P2PM) category will also be exempt from MDR. 

This means that the proportion of UPI payments that will attract a charge is actually even smaller than 2.5%. 

Who stands to gain the most?

The government has said that the MDR will be shared among payment ecosystem participants, including banks, payment service providers, and UPI application providers.

The analysis of the NPCI data shows that the P2M transactions above ₹2,000 make up 20% of all UPI transactions by value. That is, while ₹29.8 lakh crore was transacted over UPI in August 2026, P2M transactions above ₹2,000 were ₹5.99 lakh crore. 

This means that the absolute maximum that banks and payment processors can earn from MDR is about ₹2,400 crore a month (0.4% of Rs 5.99 lakh crore) or ₹28,000 crore a year. However, since there are multiple caveats, exemptions, flat rates, and caps imposed, the total amount receivable will be lower than this. 

The way MDR works is that the bulk of the charge (about 40% of what is collected) goes to the payer’s bank since it holds the customer’s bank account, and bears the core authorisation, security, and settlement costs of the transaction. 

Here, Yes Bank is the undisputed gainer, since it is the payer bank in more than 50% of all UPI transactions. The second largest is ICICI Bank at 18.3%. 

Of the MDR collected, the merchant’s bank or receiving bank receives 30%. This is because they manage the merchant’s relationship, handle the QR code deployment, and process merchant settlements. 

Here, too, Yes Bank is the payee in about 55% of all UPI transactions and so stands to earn the most from the MDR, followed by Axis Bank at about 19%.

Another 20% of the MDR goes to the UPI app or Third-Party Application Provider (TPAP). PhonePe and Google Pay stand to benefit from this, since PhonePe accounts for about 46% of UPI transactions by volume and Google Pay another 32%. 

The final 10% of the MDR goes to the Payment Service Provider that connects the technology partner bank that connects the UPI application to the central network switches.  

The government has also said that a dedicated fund will be established to promote UPI adoption among small merchants, with an amount equivalent to 5% of total MDR collections contributed to this fund. It does not specify from which of the payment system players this 5% will be taken.

Published – September 16, 2026 12:43 pm IST

As many as 23% of the total 56.04 crore Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts are inoperative, Minister of State for Finance Pankaj Chaudhary said on Monday (August 18, 2025).

Out of 56.03 crore PMJDY accounts at the end of July 31, 2025, 13.04 crore such accounts are inoperative, he said in a written reply in the Lok Sabha.

Uttar Pradesh has the highest number of inoperative Jan Dhan accounts of 2.75 crore, followed by Bihar at 1.39 crore and Madhya Pradesh at 1.07 crore, he said.

As per the Reserve Bank of India (RBI) guidelines dated February 18, 2009, a savings account should be treated as inoperative/dormant if there are no transactions in the account for over a period of two years.

The government has taken various steps to ensure smooth functioning of PMJDY accounts, including Direct Benefit Transfer (DBT). These benefits are transferred even to the inactive accounts.

Banks inform account holders in writing through letters or email or SMS about the accounts which are to become inactive and also contact the holder(s) of the inoperative accounts through letters, email or SMS on a quarterly basis, he said.

The government launches various specific campaigns from time to time for promotion of enrolment under various schemes, as well as for issues like activation of inoperative accounts, he said.

Recently, a Gram Panchayat level Saturation Campaign has been launched from July 1, 2025 to September 30, 2025 across the country wherein Re-KYC of ‘inactive PMJDY accounts’ is one of the key focus activities of the campaign, he said.

Replying to another question, Mr. Chaudhary said there is no proposal to impose transaction charges on UPI, at present.

“In order to ensure continuity of the UPI services by the ecosystem partners, the government had implemented the incentive scheme during the last four years i.e. FY 2021-22 to FY 2024-25. During this period, the government has extended incentive support of approximately ₹8,730 crore,” he said.

In reply to another question, Mr. Chaudhary said Public Sector Banks (PSBs) raise capital from the market to meet their capital requirements from time to time.

The robust financial strength of PSBs has boosted investors’ confidence, enabling them to raise capital from the market.

Banks raise capital from the market in the form of equity, Basel III compliant Additional Tier-I andTier -II bonds..

“Total amount of capital raised by PSBs in the form of both equity and bonds during the last three financial years [FY2022-23 to FY 2024-25] amounts to ₹1,53,978 crore [₹44,942 crore in FY2022-23, ₹57,380 crore in FY 2023-24 and ₹51,656 core in FY 2024-25],” he said.

The fresh raising of capital by banks is used for various purposes, which included meeting the capital needs of banks to support credit growth, meeting regulatory requirements for capital adequacy, complying with minimum public shareholding norms by increasing public shareholding, replenishing AT-1 bonds due for exercising call option, strengthening the overall capital position ofthe bank and creating capital buffer for their future business requirements, he said.

Replying to another question, Mr. Chaudhary said the ratio of Gross Non-Performing Assets in gold loans to the outstanding gold loans for SCBs has increased marginally from 0.20% in March 2023 to 0.22% in March 2025, while for Upper- and Middle-Layer NBFCs it has increased from 1.21% to 2.14% over the same period.

The RBI has further informed that the data related to gold loans sanctioned by SCBs and NBFCs is not maintained by it, he said.

The Office of the RBI Ombudsman has received 188 complaints related to gold loans during the financial year 2024–25, he said, adding that these complaints are handled in accordance with the provisions of the RBI Integrated Ombudsman Scheme, 2021..

To a question with regard to RBI’s current official position on the regulation and legal status of cryptoassets, Mr. Chaudhary replied that RBI has informed that cryptocurrencies and crypto assets do not fall under its regulatory domain.

Published – August 18, 2025 04:28 pm IST