UPI Transaction Growth Slows to 23.5% in FY27

Growth in transactions through India’s Unified Payments Interface (UPI) has moderated during the first four months of FY27, even as the digital payment platform continues to process transactions at a massive scale. UPI transaction volumes increased 23.5% year-on-year during April-July 2026, compared with growth of 33.5% in the corresponding period of the previous financial year.

According to data from the National Payments Corporation of India (NPCI) cited in reports, UPI processed around 92 billion transactions between April and July 2026, compared with 74.5 billion transactions during the same four-month period a year earlier. This represents an addition of approximately 17.5 billion transactions, despite the moderation in the overall growth rate.

The slowdown is part of a broader moderation in UPI’s expansion. Transaction volumes had grown by around 41% in FY25 and nearly 30% during FY26. Although the four-month FY27 growth rate is not directly comparable with full-year figures, the numbers indicate that the exceptionally high growth rates seen during the earlier phase of UPI adoption are beginning to moderate.

However, growth in the value of UPI transactions has shown a different trend. Transaction value increased by around 20% during April-July FY27, compared with approximately 18.5% growth in FY26. This suggests that while the pace of increase in transaction numbers has slowed, the monetary value flowing through the UPI ecosystem continues to expand strongly.

The development comes amid renewed debate over the Merchant Discount Rate (MDR) applicable to UPI transactions. MDR is the fee paid by merchants to banks and payment service providers for processing digital transactions. UPI has operated under a zero-MDR regime since 2020, a policy intended to accelerate the adoption of digital payments.

Banks, fintech companies and payment firms have argued that the absence of MDR limits the revenue available for investing in areas such as merchant acquisition, customer incentives and expansion of payment infrastructure. At the same time, supporters of the zero-MDR framework maintain that keeping UPI payments free encourages wider adoption, particularly among new users and smaller merchants.

Reports indicate that discussions have included the possibility of introducing an MDR of around 0.25%-0.30% on certain high-value transactions involving large merchants. The debate gained further attention following passage of the Taxation and Other Laws (Amendment) Bill, 2026 by the Lok Sabha on August 6.

Despite the moderation in its growth rate, UPI remains the dominant component of India’s digital payments ecosystem. Reports estimate that it accounts for around 88% of digital transactions in the country and processes more than 23 billion transactions worth close to ₹30 lakh crore every month.