IIT Bombay professors Ashish Das and Pragya Das published a study on July 24, 2026, demanding that the Merchant Discount Rate (MDR) on UPI transactions be cut from 0.40% to 0.08% and that banks relinquish their current 70‑percent share of the fee. The authors argue that banks already reap a massive ₹4.85 lakh crore net interest margin from CASA deposits in FY26, a surplus that could fund the UPI infrastructure.
—Yet banks have historically pocketed the bulk of MDR revenue, a model the report calls “large and disproportionate.” 3% of the CASA margin, roughly ₹15,000 crore, could be earmarked for upgrading UPI services, the authors suggest, shifting the burden from merchants to the banking sector.
The report also proposes a digital payment fee for online merchant transactions, a lower credit‑card MDR, and a review of generous ATM withdrawal allowances. It recommends continuing the Payments Infrastructure Development Fund (PIDF) to bring more merchants online and limiting the credit‑card MDR applied to UPI to a flat ₹40 per transaction.
In the wake of the release, RBI officials have yet to issue a formal response, but industry analysts predict a heated policy debate. The next step will likely involve a consultation round between the RBI, the Ministry of Finance, and major banks to assess the feasibility of the proposed reforms.