A small fee will not have major impact on UPI transaction volumes, says RBI Governor Sanjay Malhotra. The Reserve Bank of India hiked its benchmark interest rate by 25 basis points to 5.50 per cent on Wednesday, its first increase in nearly four years, and Malhotra announced the decisions made by the six-member Monetary Policy Committee.The interest rate hike signalled that further hikes could follow as rising inflation and a weakening currency prompt a policy pivot.The Committee voted unanimously to raise the repo rate, the first such increase since Governor Sanjay Malhotra took office in December 2024. While the move was widely expected, the central bank sprang a surprise in shifting its stance towards “calibrated tightening”, effectively ruling out a rate cut in the near term.“Rate cuts are off the table in the near term and policy action ahead can only be a rate hike or a pause, depending on the evolving conditions and the outlook,” Malhotra said announcing the MPC decisions.The governor, however, cautioned that the timing and extent of any further tightening would depend on the evolution of inflation and growth, particularly underlying price pressures and the extent to which supply shocks become embedded in the broader economy.Malhotra’s remark on UPI transactions following concerns over the merchant discount rate (MDR) regime, which would come into effect on October 15. MDR is the fee merchants pay to the entities that help facilitate a digital transaction: banks, payment service providers, and third-party apps.It will be levied if you make a payment to a merchant above Rs 2,000, at a uniform rate of 0.4% (with a few exceptions). This is supposed to be a charge “within the merchant payment ecosystem” — and not on customers making UPI payments.Story continues below this adEven though a plea was filed before the Supreme Court against levying a charge on UPI transactions, the top court refused to grant a stay on the government’s decision, it sought responses from the Centre and others on the petition challenging the MDR move.With PTI inputs