The National Payments Corporation of India (NPCI) has told the Supreme Court that maintaining a zero Merchant Discount Rate (MDR) across all Unified Payments Interface (UPI) transactions is no longer financially sustainable. The organisation has argued that the rapidly expanding digital payments ecosystem requires greater investment in infrastructure, security and operational resilience, and that these costs cannot continue to be absorbed entirely through public funding.
The submission brings renewed attention to the financial model supporting India's digital payment infrastructure, particularly the question of who should bear the growing cost of processing millions of transactions every day.
According to the report published by The Hindu on November 5, 2026, NPCI warned that the existing zero-MDR arrangement could place increasing pressure on the public exchequer as transaction volumes continue to rise.
UPI's Record Transaction Growth Increases Infrastructure Demands
NPCI highlighted the extraordinary growth of UPI while presenting its position before the Supreme Court.
In August 2026 alone, UPI processed approximately 24.51 billion transactions, with a cumulative value of around ₹29.82 lakh crore. This represented the platform's highest-ever monthly transaction volume at the time.
The daily average stood at approximately 791 million transactions during the month, demonstrating the scale at which India's digital payment infrastructure now operates.
The figures for the entire financial year 2025–26 were even more substantial:
Total transactions: Approximately 241.62 billion.
Total transaction value: Approximately ₹314 lakh crore.
August 2026 transactions: Approximately 24.51 billion.
August 2026 transaction value: Approximately ₹29.82 lakh crore.
NPCI argued that such growth creates corresponding demands for stronger payment infrastructure, improved security systems and greater operational capacity.
Why NPCI Believes Zero MDR Is No Longer Sustainable
Merchant Discount Rate, commonly known as MDR, refers to the charge associated with processing digital payments through payment service providers and acquiring institutions. Depending on the payment arrangement, it may be shared among different participants in the payment ecosystem.
NPCI's submission challenges the long-term sustainability of a system in which merchants are not charged MDR for eligible UPI transactions.
The organisation reportedly argued that the operational requirements of an expanding payment network cannot be supported indefinitely without a sustainable funding mechanism. As transaction volumes increase, the infrastructure must also handle greater processing capacity, security requirements and system resilience.
The concern is that if these costs continue to be funded without a corresponding revenue structure, the financial burden could increasingly fall on the public exchequer.
The argument places the spotlight on balancing affordable digital payments with the financial requirements of maintaining a reliable national payment network.
Security and Resilience Become Central to the Debate
NPCI has emphasised that the scale of UPI transactions requires continuous investment beyond basic payment processing.
A large digital payment network must maintain systems capable of handling high transaction volumes while protecting users and participating institutions against operational disruptions and security threats.
The key areas highlighted in the reported submission include:
Infrastructure capacity: Supporting increasing transaction volumes without compromising performance.
Payment security: Strengthening safeguards across the digital transaction ecosystem.
Operational resilience: Maintaining reliable services as the network expands.
Financial sustainability: Establishing a model that can support long-term operational requirements.
These requirements have become increasingly important as digital payments form a significant part of everyday commercial activity in India.
What Could the MDR Debate Mean for Merchants and Consumers?
NPCI's position has broader implications for merchants, payment providers and consumers. A change in the existing MDR framework could influence how the cost of processing UPI payments is distributed across the ecosystem.
For merchants, any change in payment-processing charges could affect transaction expenses, depending on the applicable rules and categories of transactions.
For consumers, the central question is whether the existing convenience and accessibility of UPI can be maintained while ensuring that the infrastructure supporting it remains financially viable.
However, NPCI's submission should not be interpreted as confirmation that MDR charges have already been introduced across UPI transactions. The report describes the organisation's position before the Supreme Court, not a final policy decision announcing a universal charge.
The Larger Question: Who Should Fund India's Digital Payment Infrastructure?
India's UPI network has become a major component of the country's digital financial infrastructure. Its continued expansion requires investment in technology, security, connectivity and operational systems.
NPCI's argument highlights a fundamental policy challenge: how to maintain affordable digital payments while ensuring that the institutions operating the network have sufficient resources to support its growth.
The debate is therefore not limited to whether merchants should pay a transaction charge. It also concerns the long-term funding model for a payment system that supports businesses, consumers and financial institutions nationwide.
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The Supreme Court proceedings and any subsequent policy decisions will be important in determining how the costs of India's expanding UPI infrastructure are managed in the future.