RBI Throws Weight Behind New UPI MDR For 'Long-Term Sustainability'

The Reserve Bank of India has backed the introduction of 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.

In a post on X, the central bank said MDR on UPI transactions above Rs 2,000 would help the payments ecosystem continue to scale and invest in technology, infrastructure and acceptance networks.

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The RBI said a fair and appropriate distribution of MDR among ecosystem participants could support wider UPI acceptance, expand the customer base and sustain growth in transaction volumes.

"A fair and appropriate distribution of MDR across ecosystem participants will support continued investment in technology, infrastructure and acceptance networks. This, in turn, can enable wider UPI acceptance, deepen the customer base and support sustained growth in transaction volumes," the statement said. 

Importantly, UPI transactions will remain free for users, both for person-to-person (P2P) and person-to-merchant (P2M) payments, the RBI said.

For merchants, P2M UPI transactions below Rs 2,000 will continue to remain free. MDR may, however, be levied on merchants for P2M transactions above Rs 2,000.

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The central bank said the changes are aimed at balancing affordability with the need for continued investment in the digital payments infrastructure.

“RBI remains committed to ensuring that UPI continues to be safe, seamless, affordable, and accessible,” it said, while reiterating its focus on the long-term growth of India's digital payments ecosystem.

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