Dilip Asbe, MD and CEO of the National Payments Corporation of India (NPCI), stated that introducing a merchant discount rate (MDR) on UPI transactions is essential to fund rising cybersecurity and infrastructure costs. Speaking at the 13th SBI Banking & Economics Conclave 2026, Asbe confirmed the MDR regime will take effect from October 15, targeting select peer-to-merchant UPI payments exceeding ₹2,000 with a 0.4% charge capped at ₹300 per transaction, according to inc42.com.
Asbe explained that cyberattack tools have become more powerful than the defensive technologies currently deployed within the payments ecosystem. To maintain trust in the payment system, banks and payment companies must invest continuously in artificial intelligence to protect their platforms. He emphasized that AI solutions are expensive but necessary to safeguard users and ensure system integrity. The MDR charges will help cover these escalating costs, including scalability and infrastructure expansion, he added.
The MDR framework applies to specific UPI merchant payments, with lower or fixed charges for sectors such as fuel, railways, telecom, insurance, and capital markets. Asbe highlighted that the cost of maintaining and expanding the payments infrastructure has increased sharply, necessitating a market-driven economic model for UPI. This move aligns with broader industry efforts to strengthen cybersecurity amid rising digital payment adoption in India.
The MDR regime for select UPI transactions will be implemented starting October 15, 2026, marking a significant policy shift aimed at funding AI-powered cybersecurity enhancements across the payments ecosystem, as detailed by NPCI’s CEO Dilip Asbe at the SBI conclave.