Indians Switching to Cash Transactions, Using UPI Less Since Govt’s Merchant Fee Announcement: Report
An analysis shows that while UPI transaction growth rate has slowed to 18.7% growth as of August, it is still higher than the 13% growth in cash with the public in the same period.
New Delhi: While the parliament has passed the Taxation and Other Laws (Amendment) Bill, 2026, in the recently-concluded monsoon session that will allow a Merchant Discount Rate (MDR) charge to be levied on Unified Payments Interface (UPI) transactions, data shows that these transactions have been slowing in the last five years, with cash flow increasing in the same period.
Data from the Reserve Bank of India (RBI) shows the growth rate of cash with the public reached a high of about 17% in 2020-21 during the Covid-19 pandemic. While this figure reduced to about 4% till 2023-2024, it has since recorded an uptick, The Hindu has reported.
The Hindu’s analysis using the RBI data shows that the rate of growth of cash with the public rose to 6.5% in 2024-25 and further to 12% in 2025-26. The report also found that in 2026-27, cash with the public, as of July 31, 2026, is at Rs 41.8 lakh crore, which is nearly 13% higher than in the same period previous year.
In comparison, UPI transactions have declined, according to data from the National Payments Corporation of India (NPCI). UPI transactions slowed down to about 95% in 2020-21 as opposed to its growth of 133% in 2019-20. Following the Covid-19 pandemic the rate rose again to 105%, but since then value of transactions done on UPI platforms has consistently been slowing, with growth hitting 20.3% in 2025-26.
The data said, in 2026-27, the growth rate of UPI transactions further slowed to 18.7%, as of August 2026, as compared to the April-August period of last year.
The report added that this 18.7% growth in UPI transactions is still higher than the 13% growth in cash with the public in the same period.
Pronab Sen, former Chief Statistician of India and former Chairman of the Standing Committee on Statistics, told the daily that the growing rates of both cash and UPI transactions should present themselves in higher inflation rates.
“This would imply that we are undercounting inflation, because that’s where this should show up,” he was quoted as saying.
In parliament, Union finance minister Nirmala Sitharaman has said, “Merchant discount rate applies only on the merchants and not on the end users/customers.” Opposition members have, however, raised concerns that this charge will eventually be passed on to customers.
Earlier this month, RBI governor Sanjay Malhotra said it is “premature” to discuss MDR on digital payments right now. However, he also noted that investment in public infrastructure like payments is necessary and someone has to pay for it.
This article went live on August sixteenth, two thousand twenty six, at twenty-nine minutes past one in the afternoon.
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