India's Unified Payments Interface (UPI) continues to see strong transaction volumes, but its pace of expansion has slowed in the first four months of the current financial year.
Data from the National Payments Corporation of India (NPCI), which operates the UPI network, shows that around 92 billion transactions were processed between April and July of FY27. This was up from 74.5 billion transactions during the same period last year, translating into a 23.5 per cent year-on-year increase.
The growth, however, was significantly lower than the 33.5 per cent rise recorded during the corresponding period of FY26.
UPI growth has been slowing
The latest figures point to a broader moderation in UPI's expansion. Transaction volumes grew by nearly 30 per cent in FY26, compared with 41 per cent growth in FY25.
One factor being discussed alongside the slowdown is the future of the Merchant Discount Rate (MDR), a fee paid by merchants to banks and payment service providers for processing digital transactions.
The government has maintained a zero-MDR policy on UPI since January 2020 to encourage digital payment adoption. Fintech companies and payment providers have argued that the absence of such a fee has made it harder to build a sustainable revenue model and maintain incentives for further investment.
The industry has also seen a reduction in cashback schemes and promotional offers that had helped drive UPI adoption in earlier years, as companies increasingly focus on profitability.
Transaction value tells a different story
While transaction volumes are growing at a slower pace, the value of payments made through UPI has remained relatively strong.
Transaction value increased by around 20 per cent between April and July of FY27, compared with 18.5 per cent growth in FY26. The trend suggests that users are increasingly using UPI for higher-value payments.
Supporters of the zero-MDR model argue that keeping UPI free for merchants has helped make digital payments accessible to small businesses and underserved sections. They warn that introducing charges could affect further adoption.
MDR debate gains momentum
The issue gained fresh attention after the Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026, on August 6. The legislation could provide a framework for introducing MDR on selected UPI transactions.
Reports have suggested that the government is considering an MDR of 0.25 per cent to 0.30 per cent on high-value transactions conducted by large merchants.
Despite the slower growth, UPI remains India's leading digital payment platform, accounting for nearly 88 per cent of digital transactions. It currently processes more than 23 billion transactions a month, with cumulative transaction value of nearly Rs 30 lakh crore.