The Reserve Bank of India on Tuesday defended the strategic integration of a 0.4 per cent Merchant Discount Rate (MDR) on UPI commercial transactions exceeding Rs 2,000, defining it as a foundational step to guarantee the long-term financial health and innovation capacity of India’s booming digital ecosystem. Setting aside nearly six years of a completely free payment structure, the newly announced guidelines set to take effect on October 15 ensure that everyday peer-to-peer transfers and low-value merchant payments under Rs 2,000 remain completely untouched, protecting everyday consumers from any added costs. Official clarifications from the finance ministry and NPCI reiterated that MDR is strictly confined to the merchant settlement layer and is never charged directly to customers. The RBI noted that a well-distributed framework of these fees will drive essential investments into payment infrastructure, expand acceptance points nationwide, and support high-volume transaction growth while keeping the platform secure and affordable. Maintained by the NPCI, UPI has grown exponentially since August 2016, with overall transaction values soaring from Rs 0.07 lakh crore in FY17 to about Rs 314 lakh crore in FY26, alongside establishing cross-border acceptance in 11 countries, ranging from European nations like France and Greece to regional partners like Bhutan, Nepal, Sri Lanka, and Uzbekistan.
