In a significant development for India’s digital economy, the Reserve Bank of India stated on Tuesday that applying a 0.4 per cent fee on merchant UPI transactions valued above Rs 2,000, effective October 15, is a necessary measure to reinforce the structural durability of the country’s payment networks. Breaking a nearly six-year streak of completely free service across all transaction categories, the new rule introduces the Merchant Discount Rate (MDR) exclusively for high-value commercial transfers while completely insulating regular consumers and low-value merchant transactions under Rs 2,000 from any financial burden. The finance ministry underscored that the MDR is strictly an internal trade ecosystem fee and will not be levied on end-users. The central bank explained that fair distribution of these proceeds among participating institutions will channel critical capital into infrastructure upgrades, technical security, and wider merchant networks, fostering sustained market expansion. While safeguarding affordability for common citizens and small vendors through continuous zero-fee P2P and low-value P2M transactions, the RBI emphasized its pledge to maintain a safe and accessible ecosystem. Developed under the NPCI—an initiative of the RBI and Indian Banks’ Association—UPI has completely overhauled financial transactions since its inception on August 25, 2016, scaling volumes from Rs 0.07 lakh crore in FY17 to roughly Rs 314 lakh crore in FY26, alongside its international acceptance scaling across 11 countries including recent entrant Uzbekistan, Qatar, Bhutan, and Mauritius.
