The Reserve Bank of India announced on Tuesday that the implementation of a Merchant Discount Rate (MDR) on high-value UPI transactions serves as a crucial milestone for ensuring the long-term viability of the nation’s digital payment framework, following a government proposal to apply a 0.4 per cent fee on merchant transfers crossing the Rs 2,000 threshold starting October 15. In a public statement on X, the central bank emphasized that this policy will empower UPI to maintain its rapid scaling, foster ongoing innovation, and continuously cater to businesses and citizens nationwide, effectively concluding nearly six years of entirely zero-cost UPI operations. Crucially, the Ministry of Finance clarified via an NPCI circular that everyday consumer transactions and smaller payments remain completely shielded, ensuring customers face zero charges. Describing MDR as an internal merchant ecosystem fee rather than a consumer levy, the RBI noted that a balanced distribution of these charges among stakeholders will drive vital investments into advanced technology, security infrastructure, and merchant acceptance networks, thereby broadening financial inclusion. Furthermore, the authorities reaffirmed that all regular Person-to-Person (P2P) transfers and merchant payments under Rs 2,000 will stay free of cost for users and small vendors alike, preserving affordability. Operated by the National Payments Corporation of India—a joint initiative of the RBI and Indian Banks’ Association—UPI has dramatically revolutionized the domestic financial terrain since its August 2016 launch, scaling transaction values exponentially from Rs 0.07 lakh crore in fiscal 2017 to approximately Rs 314 lakh crore in fiscal 2026, alongside establishing a global footprint across 11 nations including Singapore, France, the UAE, and recently Uzbekistan.
Reserve Bank Responds to Large-Transaction UPI Fees, Emphasizes Stronger Digital Ecosystem
