In a country where today payment is done everywhere from tea stall to mall by just scanning a QR Code, where UPI has almost eliminated the hassle of carrying cash and change in the purse, suddenly a question has arisen which has shocked everyone. Imagine, if MDR i.e. Merchant Discount Rate is imposed on UPI payments of more than Rs 2000, will merchants and customers once again start returning to cash? And if this happens, will it affect only your pocket or will it also have a huge impact on the number of notes circulating in the country and the RBI's cost of printing notes?
This is the big question which is revolving in everyone's mind today. Suppose a shopkeeper takes digital transactions of huge amount every day. If tomorrow he has to pay the cost out of his own pocket for accepting digital payments, what options will he have? Either he bears this burden himself, or adds it to the price of the goods, or in some cases forces customers to pay cash.
MDR and the big game of macro-economics
This is why this issue of MDR on UPI is not just a charge issue, but there is a huge macro-economic question associated with it. The question is whether the increase in cost of digital payments will suddenly increase the demand for cash in the country? But one thing needs to be clearly understood here that this is just a guess and not a definite truth.
Just because there is talk of MDR on UPI, people will not rush to the market with bags of cash overnight. Its real impact will depend on how the country's merchants, customers and the entire payment system handle this new cost.
How much cash is circulating in the hands of the public? Shocking data of RBI
Now let us look at the figures of the Reserve Bank of India (RBI) which have come out recently. RBI has released new data of money stock on 25 September 2026. In this report, through the 'Currency with the Public' column, it has been told how much cash is actually circulating in the hands of the general public and businessmen, excluding the cash with the banks.
Statistics show that on March 31, 2026, the people of the country had a total cash of Rs 40 lakh 65,488 crore. At the same time, by September 15, 2026, this figure increased directly to Rs 42 lakh 10,170 crore. That is, within these five and a half months, a huge increase of about Rs 1 lakh 45 thousand crore was recorded in the cash available with the people of the country. If this is averaged, it is a direct increase of 3.6 percent.
But the story does not end here. If we look at the data of September 15, 2026 on a year-on-year (YoY) basis, there has been a tremendous increase of 13.6% in the cash available with the public, which is Rs 5 lakh 3 thousand crore more in terms of value.
UPI is also increasing and so is the trend of cash!
On one hand, the use of digital payment i.e. UPI in the country is continuously creating new records, on the other hand, the cash held by people is also continuously increasing. Now an even more shocking figure is that of 'Cash-to-GDP Ratio'. This ratio tells how much cash is circulating in the market compared to the size of the country's economy.
This ratio was 12.1% in March 2026, whereas exactly a year ago it was 11.7%. This clearly indicates that the trend of cash has increased in the country. Now that the new system of MDR is about to be introduced on merchant UPI payments above Rs 2,000, many experts believe that this trend of cash can gain more momentum. Big merchants or petrol pumps may ask customers to adopt other methods of payment, which may also include cash. However, the real picture will become clear only after October 15 when it will be seen how people are paying.
How much does it cost? Note printing vs digital transaction
A very important aspect of this whole matter is also related to the cost of printing notes. If we consider a transaction of Rs 1 lakh as the basis, then the estimated operational cost of a transaction of Rs 1 lakh on UPI comes to just around Rs 66.
On the other hand, if the same Rs 1 lakh has to be printed in new Rs 500-500 notes, then according to RBI data, the printing cost of a Rs 500 note comes to about 96 paise. Accordingly, the printing cost alone becomes Rs 192. And this is just the printing cost! After this, if the huge expenses of transportation, security, cash handling, sorting and ATM infrastructure are added, then this amount increases manifold.
Simply put, handling cash is much more expensive for the government and the banking system than UPI. If even by mistake the circulation of cash increases again in the country, the government's expenditure will skyrocket. Now it remains to be seen whether after October 15, the people of the country really bring any change in the way they make payments, and if there is a change, will it affect only our pockets or will the entire economy of RBI be shaken?