MDR to boost sustainability of India’s digital payments ecosystem: RBI

Posted on by Vividh Bharathi

New Delhi, Sep 15 (IANS) The Reserve Bank of India (RBI) on Tuesday said that the introduction of MDR on large-value UPI transactions is an important step towards strengthening the long-term sustainability of India’s digital payments ecosystem.

It will help UPI in continuing to scale, innovate and serve consumers and businesses across the country, Central Bank said in a statement.

“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 RBI posted on X.

Importantly, all UPI transactions – P2P and P2M – will remain free for users.

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

The RBI said it remains committed to ensuring that UPI continues to be safe, seamless, affordable, and accessible, while supporting the long-term sustainability and growth of India’s world-class digital payments ecosystem.

The new UPI framework introduced has no impact on any person to person transactions. UPI will continue to remain completely free for all person-to-person transactions, irrespective of the amount transferred, according to an explainer issued by the Finance Ministry on Tuesday.

The Finance Ministry clarified that MDR is neither a tax nor a charge collected by the Government or NPCI. It is distributed among payment ecosystem participants, including banks and payment application providers, to support the operation and continued expansion of the UPI ecosystem.

A nominal MDR of 0.4 per cent will apply only to P2M transactions above Rs 2,000. The MDR will be shared among payment ecosystem participants, including banks, payment service providers and UPI application providers. For transactions of Rs 75,000 and above, the MDR will be capped at Rs 300 per transaction.

Transactions above Rs 2,000 in essential and thin-margin sectors, including railways, telecommunications, insurance, fuel and agricultural inputs, will attract a flat MDR of Rs 5 per transaction. The flat charge will provide cost certainty for critical public services and businesses operating on narrow margins.

—IANS

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