Merchants Face 0.4% Fee on UPI Payments Above Rs 2,000
The Reserve Bank of India (RBI) kept the repo rate unchanged at 5.50% while announcing a 0.4% Merchant Discount Rate (MDR) on UPI transactions exceeding Rs 2,000 for merchants, traders, and businesses, effective from October 15. The central bank clarified that person-to-person (P2P) transactions and small vendors will remain completely exempt from these charges. Furthermore, the Centre has advised banks to ensure that this fee burden is not passed on to everyday customers, maintaining affordability and supporting the sustainability of the expanding digital payments ecosystem.
Key Points
- The RBI maintained the repo rate unchanged at 5.50% for the second consecutive time.
- A 0.4% MDR is levied on UPI payments exceeding Rs 2,000 for commercial entities and traders.
- Person-to-person transactions and small vendors are strictly exempt from these charges.
- The Centre has directed banks to ensure the fee is not passed on to end-consumer customers.
Exam Facts
- Repo rate is maintained at 5.50%.
- MDR fee percentage is 0.4% on UPI payments.
- Threshold amount for the fee is above Rs 2,000.
- Effective date of implementation is October 15, 2026.
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