# IIT-Bombay Study Recommends MDR Cut to 0.08% from 0.4%

> IIT-Bombay study urges MDR reduction to 0.08% from 0.4% for UPI transactions, excluding banks from bulk share.
- Title: IIT-Bombay Study Recommends MDR Cut to 0.08% from 0.4%
- Summary: IIT-Bombay study urges MDR reduction to 0.08% from 0.4% for UPI transactions, excluding banks from bulk share. IIT-Bombay recommends cutting UPI merchant…
- Keywords: iit-bombay, mdr, upi, npci, rbi, merchant discount rate, digital payments, Study, Recommends, Cut, The Economic Times
- Source: The Economic Times — https://economictimes.indiatimes.com/industry/banking/finance/iit-bombay-study-bats-to-cut-mdr-to-0-08-pc-from-0-4-pc-exclude-banks-from-taking-bulk-share/articleshow/134873852.cms
- Author: PTI
- Published: 2026-10-11T16:40:00+00:00
- Read time: 1 min
- Topics: iit-bombay, mdr, upi, npci, rbi, merchant discount rate, digital payments
## IIT-Bombay Study Recommends MDR Reduction
IIT-Bombay study recommends cutting UPI merchant discount rate from 0.40 per cent to 0.08 per cent.

> Mumbai, Merchant discount rate (MDR) on UPI transactions should be cut to 0.08 per cent from the present 0.40 per cent
## Current MDR Split Unfair
Current model splits 70 per cent of MDR between issuer and acquirer banks, excluding third-party providers.

> In the present model, a bulk 70 per cent is split between the issuer and acquirer banks
## Banks Overcompensated via CASA
Banks earned over Rs 4.85 lakh crore in net interest margin from CASA deposits in FY26, a disproportionate compensation.

> Banks booked over Rs 4.85 lakh crore in net interest margin (NIM) through CASA deposits in FY26
## Proposed 3% Fund for UPI Ecosystem
Banks should carve out 3 per cent of funds sacrificed by CASA depositors to run and improve UPI ecosystem.

> To run and improve the UPI ecosystem, banks should carve out, say, about 3 per cent of the funds (Rs 15,000 crore) sacrificed by CASA depositors
## RBI and Government to Direct UPI as Service
RBI and government must make UPI a necessary service for banks to remain in business, like CBS.

> It also asked the RBI and government to provide directions on making UPI as part of necessary service to be provided to remain in the banking business
## Transaction Cost Concerns
Transaction cost of Rs 300 for UPI transactions over Rs 75,000 raises questions about the reasonableness of the cap.

> The paper said a transaction cost of Rs 300 for a peer-to-merchant transaction of Rs 75,000 and above
## Credit Card MDR Reduction Needed
Credit card MDR should be reduced to address concerns that credit card users burden P2M UPI users.

> It recommended reducing credit card MDR to address concerns that credit card users are burdening P2M UPI users
## Merchant Turnover Threshold for UPI
Merchants with annual turnover of Rs 50 crore or more must provide UPI to ensure ecosystem sustainability.

> The paper suggested that merchants with annual turnover of Rs 50 crore or more must provide UPI as a means of accepting payments
## Key takeaway

IIT-Bombay recommends cutting UPI merchant discount rate from 0.4% to 0.08% and excluding banks from taking bulk share to improve digital payments.