RBI Deputy Governor S C Murmu Rejects UPI MDR Fears and Fixes AI Accountability on Bank Boards — September 18, 2026

Addressing industry stakeholders at the Bengal Chamber of Commerce & Industry’s (BCC&I) Financial Market Conclave in Mumbai, Reserve Bank of India (RBI) Deputy Governor Shirish Chandra Murmu firmly dismissed anxieties regarding the new Merchant Discount Rate (MDR) structure for Unified Payments Interface (UPI) transactions. Murmu affirmed that introducing fee recovery on merchant payments will not reverse digital adoption or drive merchants and consumers back to cash.

At the same time, the Deputy Governor delivered a direct message on technological risk management, asserting that boards of financial institutions must bear ultimate responsibility for decisions driven by artificial intelligence (AI) and machine learning models.

UPI MDR Fears Termed Groundless

The National Payments Corporation of India (NPCI) framework introduces a 0.4% MDR charge on merchant UPI transactions above Rs 2,000. The move had prompted debate across the payments sector over whether merchant levies might dampen transaction volumes or prompt traders to revert to cash.

Murmu labelled these apprehensions unfounded, pointing out that digital payment rails have achieved structural convenience and scale that transactional fees cannot easily undo. He noted that the payments framework is designed to ensure long-term commercial sustainability for participating banks, payment aggregators, and technology service providers.

The Deputy Governor also addressed India's perceived "cash paradox"—the concurrent rise in currency in circulation alongside explosive growth in UPI volumes. He clarified that cash serves a dual function in the domestic economy: as a transactional medium and as a store of value. While digital transactions have largely replaced cash for day-to-day trade, the demand for currency as a store of value persists, meaning the growth of cash in circulation should not be seen as a failure of digital adoption.

Board-Level Accountability for Artificial Intelligence

Shifting to the rapid rollout of autonomous systems in banking and credit underwriting, Murmu cautioned that technological sophistication cannot dilute regulatory responsibility.

Key Principles Outlined for AI Governance:

• Human Accountability Over Algorithms: When an automated system makes or materially influences a financial decision, lenders cannot deflect responsibility onto software or algorithms.
• Board and Executive Oversight: The board of directors and senior management of regulated entities are directly accountable for understanding deployed models, recognizing their limitations, and mitigating adverse outcomes.
• Fairness and Consumer Protection: Automated models must avoid bias, protect customer data privacy, and maintain explainability rather than operating as opaque black boxes.
• Balanced Credit Delivery: Technology should widen genuine customer choice and assess risk accurately rather than merely speeding up disbursements or steering borrowers into unsuitable products.

Murmu reiterated that the RBI's ongoing regulatory approach focuses on "similar activities creating similar risks facing similar regulatory treatment," ensuring fintech innovations proceed alongside operational resilience, fraud safeguards, and customer protections.

Compliance Rationalization

Beyond payments and technology, the Deputy Governor touched upon the central bank's ongoing efforts to streamline regulatory burdens. Over the past year, the RBI has issued more than 600 draft and final amendment circulars aimed at reclassifying, rationalizing, and simplifying regulatory requirements for commercial banks, non-banking financial companies (NBFCs), and payment operators.

The clear stance from the RBI provides regulatory certainty to listed fintech and banking shares, indicating that fee structures will be protected to ensure network viability while compliance standards around digital lending and AI governance will remain uncompromising.

Tags: Reserve Bank of India UPI NPCI Digital Payments Banking Sector Artificial Intelligence