New Delhi, 16 September (H.S.): The Reserve Bank of India (RBI) has said that introducing a 0.4 percent Merchant Discount Rate (MDR) on UPI transactions above Rs 2,000 would be an important step towards ensuring the long-term sustainability of India’s digital payments ecosystem.

In a post on the social media platform ‘X’, the RBI said that an appropriate and equitable distribution of MDR within the ecosystem would encourage continued investment in technology, infrastructure and payment acceptance mechanisms. The central bank said this would help UPI expand, innovate and continue delivering services to customers and businesses across the country.

The RBI said the move could support wider adoption of UPI, expand its customer base and facilitate sustained growth in transaction volumes. Most importantly, all UPI transactions, including person-to-person (P2P) and person-to-merchant (P2M) payments, will remain free for users. In addition, UPI person-to-merchant transactions below Rs 2,000 will remain free for merchants as well.

The central bank assured users that the RBI is committed to ensuring that UPI remains secure, seamless, affordable and accessible, while also promoting the long-term sustainability and growth of India’s world-class digital payments ecosystem.

A day earlier, the National Payments Corporation of India (NPCI) said that under the new framework introduced for large-value digital payments, merchants receiving UPI payments above Rs 2,000 would be charged a 0.4 percent Merchant Discount Rate (MDR). However, such charges on UPI payments will have no impact on ordinary consumers.

The Ministry of Finance, in a statement, said that under the new framework, merchants receiving UPI payments above Rs 2,000 would be charged an MDR of 0.4 percent. For payments of Rs 75,000 or more, the maximum charge would be capped at Rs 300. The new changes will come into effect from October 15, 2026.

For essential sectors such as railways, telecommunications and fuel, a flat charge of Rs 5 per transaction will apply, while the MDR rate for payments in the capital markets will be 0.02 percent.

It may be noted that UPI is operated by the National Payments Corporation of India (NPCI), an initiative of the Reserve Bank of India and the Indian Banks’ Association. The system enables real-time payments between individuals and allows customers to make direct payments to merchants when making purchases.

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Hindusthan Samachar / Jun Sarkar