Marking a major shift after nearly six years of fully free digital settlements, the Reserve Bank of India on Tuesday strongly backed the introduction of a 0.4 per cent Merchant Discount Rate (MDR) on merchant-bound UPI transfers exceeding Rs 2,000, calling it an essential catalyst for the enduring sustainability of India’s digital payments infrastructure. The central bank highlighted through social media channels that this economic adjustment will allow the UPI framework to continually expand, innovate, and reliably serve a vast consumer and commercial base across the country. Addressing public concerns, the finance ministry released an official statement alongside an NPCI circular assuring that regular customers will bear no direct cost, as MDR operates strictly within the merchant payment network and explicitly excludes everyday peer-to-peer transfers or low-value merchant transactions under Rs 2,000, which remain entirely free. According to the RBI, an equitable allocation of MDR revenue among financial ecosystem participants will fuel continuous reinvestment in cutting-edge tech architecture and merchant acceptance terminals, creating a ripple effect that deepens user penetration and drives transaction volumes upward. Reassuring the public of its core vision, the central bank maintained its commitment to keeping UPI secure, affordable, and universally accessible. Maintained by the National Payments Corporation of India (NPCI), UPI has witnessed an extraordinary growth trajectory over the past decade, surging over 4,000-fold from a modest Rs 0.07 lakh crore in FY17 to an estimated Rs 314 lakh crore in FY26, while successfully expanding its international presence to 11 global destinations, with Uzbekistan being the latest addition alongside nations like the UAE, France, Sri Lanka, and Greece.
