India’s Unified Payments Interface (UPI) ecosystem continued its strong growth in the first half of the current financial year, with transaction volumes
increasing 27 per cent year-on-year, according to data from the National Payments Corporation of India (NPCI). UPI recorded nearly 145 billion transactions during the April-September period, compared with 114 billion transactions in the corresponding period last year. The value processed through the digital payments network also increased, although at a slower pace, rising 20% to around Rs 177 lakh crore from Rs 148 lakh crore a year earlier. September, however, brought a modest sequential dip in the headline numbers. UPI processed 24.07 billion transactions during the month, compared with 24.5 billion in August. The value of transactions also slipped to Rs 29.37 lakh crore from Rs 29.82 lakh crore. The decline does not necessarily indicate a weakening in usage. September had one fewer calendar day than August, and the daily average actually improved. UPI handled approximately 802 million transactions per day in September, against 791 million a day in August. UPI Volumes Remain On A Strong Growth Track The first-half numbers underline how deeply UPI has become embedded in India's digital payment habits. Transaction volumes grew considerably faster than the value processed, suggesting that consumers and businesses are continuing to use the platform frequently for digital payments. The Rs 177 lakh crore transaction value recorded in the first six months of the financial year represents a substantial increase from the Rs 148 lakh crore registered in the same period a year ago. The September decline therefore needs to be read alongside the daily transaction figures rather than in isolation. On a per-day basis, UPI activity was higher in September despite the month recording fewer transactions overall. New MDR On Selected UPI Payments From October 15 The latest monthly data comes shortly before a major change in the UPI payment ecosystem. A new merchant discount rate (MDR) will take effect from October 15 for specified high-value merchant transactions. Under the new framework, an MDR of 0.4 per cent will apply to merchant UPI payments above Rs 2,000. Person-to-person transfers will not be covered by the charge and will continue to remain free. MDR refers to the fee paid by merchants to payment service providers for processing digital payments. The new structure is intended to provide a revenue mechanism for different participants involved in the UPI ecosystem. According to PTI, the MDR collected will be distributed among various participants. Customers' banks will receive 40 per cent, payment gateways will get 30 per cent, UPI apps will receive 20 per cent, while the sponsoring bank of the UPI app will get the remaining 10 per cent. The financial burden will be on merchants rather than customers. The MDR will also have a maximum ceiling of Rs 300 for transactions valued at Rs 75,000 or more. Most Routine UPI Payments Will Continue Without A Charge For consumers, the changes will not affect person-to-person UPI transfers. The majority of regular merchant transactions will also continue to be outside the new MDR framework. Specific categories of essential services will follow a different fee arrangement. UPI transactions exceeding Rs 2,000 for railways, telecom, fuel and insurance will carry a flat Rs 5 fee per transaction. Capital market-related payments will have an MDR of 0.02 per cent, with the charge capped at Rs 300. This category includes payments linked to mutual funds and stockbroking services. There is also an exemption to protect smaller merchants. Businesses collecting up to Rs 1 lakh a month through UPI QR codes will not be subject to the new charge. The exemption is estimated to cover around 96 per cent of merchant transactions. UPI Expands Its Footprint Beyond India UPI's expansion is no longer limited to domestic payments. The digital payment system is now accepted in 11 countries, with Uzbekistan becoming the latest addition. The other countries where UPI is accepted include Singapore, the United Arab Emirates, France, Mauritius, Nepal, Bhutan, Qatar, Sri Lanka, Cambodia and Greece. The overseas expansion adds another dimension to the growth of India's home-grown digital payments infrastructure, particularly as UPI continues to process increasingly large transaction volumes within India. From Rs 0.07 Lakh Crore In FY17 To Rs 314 Lakh Crore In FY26 The scale of UPI's growth becomes clearer when its transaction value is compared over the past decade. The payment system recorded transactions worth just Rs 0.07 lakh crore in FY17, the financial year following its launch on August 25, 2016. By FY26, the annual transaction value had climbed to approximately Rs 314 lakh crore. That represents an increase of more than 4,000 times over the decade, highlighting the rapid adoption of instant digital payments in India. NPCI, an initiative of the Reserve Bank of India (RBI) and the Indian Banks' Association (IBA), serves as the umbrella organisation for retail payment and settlement systems in the country. It operates UPI, which facilitates instant transfers between individuals and payments to merchants. With transaction volumes continuing to rise and the MDR framework set to change the economics of selected merchant payments, the next phase of UPI's growth will involve both expanding usage and reshaping how the broader payment ecosystem generates revenue.
