Mumbai: Indian Bank is considering waiving its share of the Merchant Discount Rate (MDR) on certain UPI transactions, a move that could reduce payment costs for merchants.
Indian Bank Managing Director and CEO Binod Kumar said the public sector lender is exploring the possibility of absorbing the 0.28 percent share that would otherwise go to the acquiring bank.
What Indian Bank Is Considering
A 0.4 percent MDR will apply to eligible person-to-merchant UPI payments above Rs 2,000 from October 15, 2026.
Of this, around 0.28 percent is expected to go to the acquiring bank. Indian Bank is considering absorbing this part instead of charging eligible merchants.
Kumar said banks already follow similar practices for credit and debit card transactions. Depending on transaction volumes, banks sometimes waive the entire MDR or charge only a part of it.
Indian Bank is now looking at whether a similar approach can be followed for UPI payments.
Customers Will Not Pay MDR
The MDR is a charge paid by merchants for processing digital payments. Customers making UPI payments will not have to pay the charge.
Under the new framework, the MDR will be capped at Rs 300 per transaction. Small merchants covered under the P2PM framework will continue to enjoy zero MDR, subject to the applicable conditions.
Bank Developing Monitoring System
Indian Bank is also developing an Application Programming Interface, or API, to monitor UPI merchant transactions after the new MDR system takes effect.
The system is expected to help the bank identify cases where customers may be charged additional amounts by merchants.
UPI Transactions At Indian Bank
Indian Bank handled around 32.6 crore UPI transactions during the first six months of FY27.
Of these, around 1.6 crore transactions, or about 5 percent, were valued above Rs 2,000.
The bank had around 21.2 lakh P2M merchants and 8.2 lakh P2PM merchants as of September 30, 2026.
