RBI backs MDR on large-value UPI transactions, says users will pay no fee

In a post on X, the central bank said the move would help UPI continue to scale and innovate while serving consumers and businesses across the country

The Reserve Bank of India (RBI) has backed the introduction of a merchant discount rate (MDR) on large-value UPI transactions, saying the move is important to ensure the long-term sustainability of India’s digital payments ecosystem.

The government on Tuesday introduced a 0.4 per cent MDR on Unified Payments Interface (UPI) payments above ₹2,000 to merchants, with the fee capped at ₹300 for payments of ₹75,000 and above.

The RBI said a fair and appropriate distribution of MDR across ecosystem participants would support continued investment in technology, infrastructure and acceptance networks. This, in turn, could enable wider UPI acceptance, deepen the customer base and support sustained growth in transaction volumes.

The RBI further said that UPI transactions would remain free for users, both for person-to-person (P2P) and person-to-merchant (P2M) payments. For merchants, P2M UPI transactions below ₹2,000 would continue to remain free of MDR. MDR may, however, be levied on merchants for P2M transactions above ₹2,000. The RBI said it remained committed to ensuring that UPI continues to be safe, seamless, affordable and accessible, while supporting the long-term sustainability and growth of India’s digital payments ecosystem.