New Delhi, September 15 (Read) : The Reserve Bank of India (RBI) has announced that implementing Merchant Discount Rate (MDR) on high-value UPI transactions is a significant step towards strengthening the long-term sustainability of India’s digital payment ecosystem.
In a recent statement, the central bank emphasized that this move would help expand the reach of UPI across the country, bringing new features and services to customers and businesses alike. The RBI shared this information on the social media platform X, stating, “A fair and proper distribution of MDR among ecosystem participants will promote continuous investment in technology, infrastructure, and acceptance networks. This will enable UPI to be accepted in more locations, increase the number of customers, and consistently boost transaction volumes.”
Importantly, all UPI transactions—both Person-to-Person (P2P) and Person-to-Merchant (P2M)—will remain free for users. For P2M transactions under ₹2,000, merchants will not incur any charges, while MDR will apply for transactions above this threshold.
The RBI reiterated its commitment to ensuring that UPI remains secure, user-friendly, affordable, and accessible to all, while also promoting the long-term sustainability and growth of India’s world-class digital payment ecosystem.
The newly established UPI framework will not affect P2P transactions, which will continue to be entirely free, regardless of the amount transferred, according to a clarification issued by the Finance Ministry.
It was further clarified that MDR is neither a tax nor a charge levied by the government or the National Payments Corporation of India (NPCI). Instead, it is shared among participants in the payment ecosystem, such as banks and payment application providers, to facilitate the operation and continuous expansion of the UPI ecosystem.
A nominal MDR of 0.4% will only apply to P2M transactions exceeding ₹2,000, with a maximum charge of ₹300 per transaction for those above ₹75,000. For essential and low-margin sectors like railways, telecom, insurance, fuel, and agricultural goods, a flat MDR of ₹5 will be applicable for transactions above ₹2,000. This fixed charge aims to provide cost certainty for essential public services and businesses operating on thin margins.
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RBIs MDR Implementation to Enhance Indias Digital Payment Ecosystem