India's UPI and Digital Public Infrastructure Exports — 2026-09-25
The dominant story this week is the political and commercial fallout from UPI's new 0.4% merchant fee, set to take effect October 15 — with NPCI CEO Dilip Asbe defending it as necessary to recover roughly ₹15,000 crore in annual costs, while trade bodies demand a rollback. Meanwhile, Delhi signaled that the MDR could apply across the 11 countries where UPI is live, and a major AMLD/market-share debate intensified over the windfall going to PhonePe and Google Pay. A separate BCG report hailed India as the global benchmark for instant payments.
India's UPI and Digital Public Infrastructure Exports — 2026-09-25
Top developments
Trade body urges Sitharaman to roll back UPI MDR, claiming 6 crore livelihoods hit
On September 25, a trade body (Chairman Brijesh Goyal) appealed to Finance Minister Nirmala Sitharaman to roll back the new merchant discount rate, warning that "6 crore shopkeepers and traders" would be impacted and that merchants might reconsider accepting UPI for larger transactions. From October 15, eligible person-to-merchant UPI payments above ₹2,000 will attract an MDR of 0.4%, capped at ₹300 per transaction.
NPCI CEO: UPI costs banks about ₹21,000 crore a year; fee could recover ₹13,000–15,000 crore
NPCI CEO Dilip Asbe said this week that UPI transactions cost banks roughly ₹21,000 crore annually, framing the new fee as cost recovery rather than monetization. According to Asbe, the 0.4% MDR could recover about ₹13,000–15,000 crore per year while most transactions remain free, with 80% of the MDR coming from large businesses.
Government: MDR must not be passed to consumers; GST Council may review 18% tax
The government on Thursday (September 25) said MDR on UPI should be treated like card payments — not passed on to consumers — and will ask the Indian Banks' Association to ensure merchants don't burden customers once the regime kicks in. Separately, NPCI clarified on September 22 that small merchants and 96% of transactions remain unaffected: MDR applies only to P2M payments above ₹2,000, with a concessional flat ₹5 MDR for railways, telecom, insurance and fuel. The GST Council may review the 18% GST on MDR next month.
MDR could extend to UPI's 11 international markets
Finance ministry sources said on September 25 that charges will not apply only in India — payments made in the 11 countries where UPI services are offered will also attract fees. This is a significant signal for UPI's export markets including France, UAE and Singapore, as monetization quietly extends to the cross-border footprint.
BCG report: India alongside Brazil and Colombia as instant-payments benchmark
Business Today reported (September 24, citing a BCG report) that UPI processed 23.2 billion transactions in May 2026, placing India alongside Brazil and Colombia as countries where instant payments have reshaped the market — reinforcing UPI's role as the global template that India is exporting.
Local view
- Hindi media is heavily focused on whether merchants can refuse UPI payments after October 15; ABP Live ran a detailed explainer on the 0.4% MDR on transactions above ₹2,000, noting merchants bear the fee.
- News18 Hindi amplified NPCI's reassurance that "96% of transactions won't attract a rupee of GST," attempting to quell panic among small shopkeepers.
- India Today Hindi flagged a political angle: the fee issue could complicate the BJP's position ahead of the 2027 UP elections, with the opposition framing it as a hit to ordinary people's pockets.
- The Hindu reported electronics retailers' complaints that the fee "penalises legitimate businesses" to recover banking operational costs.
Context & numbers
- UPI volumes: 23.2 billion transactions in May 2026; June dipped 2.09% to 22,716.07 million (per NPCI data via Meetanshi).
- Record month: 2,264 crore transactions in March 2026, worth ₹29.53 lakh crore; FY 2024–25 retail digital payments value was ₹849.12 lakh crore, up 18.04% YoY.
- FY2025–26 UPI value crossed ₹314 lakh crore; PhonePe holds ~46.2% market share, Google Pay 32.7%.
- Mint estimates the MDR could funnel a ₹3,200 crore pool to the apps: roughly ₹1,000–1,200 crore for PhonePe, ₹800–900 crore for Google Pay, ₹200–300 crore for Paytm.
- UPI is live in 11 countries; UPI's first international rollout was Bhutan in July 2021.
On the radar
- October 15, 2026: MDR go-live for eligible UPI P2M transactions above ₹2,000 (0.4%, capped ₹300; flat ₹5 in railways/telecom/insurance/fuel).
- Next month: GST Council may review the 18% GST applied to the MDR.
- Watch whether the IBA framework to prevent MDR pass-through to customers is formalized before October 15.
- Debate worth tracking (opinion, not fact): TechPolicy.Press argues India should define rights safeguards for DPI at home before exporting it, amid reports (e.g., Biometric Update on a reported Uzbekistan deal) that identity and payments infrastructure deals are advancing in Central Asia.
This content was collected, curated, and summarized entirely by AI — including how and what to gather. It may contain inaccuracies. Crew does not guarantee the accuracy of any information presented here. Always verify facts on your own before acting on them. Crew assumes no legal liability for any consequences arising from reliance on this content.
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