UPI transactions in India surged by 27% to 145 billion in the first half of FY27, driven by strong digital payment adoption despite a slight moderation in September, as industry stakeholders prepare for new merchant fees on high-value payments.
- UPI transaction volume at 145 billion, up 27% from last year
- Transaction value growth at a slower pace of 20%, reaching Rs 177 lakh crore
- New 0.4% MDR on merchant transactions exceeding Rs 2,000 set for October 15
What happened
In the first half of the fiscal year 2026-27, UPI transaction volume recorded a significant increase of 27%, rising to approximately 145 billion transactions compared to 114 billion during the same period last year. The total transaction value also grew, albeit at a slower pace of 20%, reaching Rs 177 lakh crore compared to Rs 148 lakh crore in the previous year. However, the volume and value of transactions both dipped slightly in September due to fewer days in the month and natural market fluctuations.
The National Payments Corporation of India (NPCI), which operates the UPI system, released these figures ahead of a planned implementation of a new merchant discount rate (MDR) fee. This fee, set to take effect from October 15, imposes a 0.4% charge on merchant transactions above Rs 2,000 to help create a sustainable revenue model for the digital payments ecosystem.
Why it matters
The growth in UPI transaction volume underscores the increasing reliance on digital payments in India, reflecting continued consumer and merchant adoption despite an evolving regulatory environment. UPI's expansion has transformed India's payments landscape, improving accessibility and convenience for millions of users and merchants nationwide.
The upcoming MDR introduction signifies a critical shift in the payment ecosystem's economic structure. While person-to-person transactions remain free, levying fees on higher-value merchant transactions aims to support digital infrastructure sustainability. The MDR revenue will be shared among banks, payment gateways, UPI app providers, and sponsoring banks, reflecting a balanced distribution model designed to maintain contributions from all stakeholders.
What to watch next
Market participants should closely monitor the impact of the new MDR on merchant behavior, particularly for higher-value transactions. While small merchants with monthly collections up to Rs 1 lakh via UPI QR codes remain exempt, changes could alter transaction patterns among larger merchants and sectors such as railways, telecom, fuel, and insurance, where a flat Rs 5 fee per transaction above Rs 2,000 will apply.
Additionally, the continued international expansion of UPI—now accepted in 11 countries including recent entry into Uzbekistan—will be a key trend to watch. This overseas acceptance could further drive cross-border digital payment volumes and influence India's fintech competitiveness on a global scale.