New Delhi: The Reserve Bank of India (RBI) has backed the introduction of Merchant Discount Rate (MDR) on large-value Unified Payments Interface (UPI) transactions, saying the move will help strengthen the long-term sustainability of India’s digital payments ecosystem.
According to the RBI, MDR on UPI transactions above ₹2,000 is expected to support continued investment in technology, payment infrastructure and merchant acceptance networks.
The central bank said a fair and appropriate distribution of MDR among participants in the digital payments ecosystem would help UPI continue to scale and innovate while expanding its reach among consumers and businesses.
UPI transactions to remain free for users
The RBI clarified that all UPI transactions, including person-to-person (P2P) and person-to-merchant (P2M) payments, will remain free for users.
For merchants, P2M UPI transactions below ₹2,000 will continue to remain free, while MDR may be levied on eligible P2M transactions above the ₹2,000 threshold.
The RBI said the changes are aimed at supporting wider acceptance of UPI and expanding the customer base, which could contribute to sustained growth in transaction volumes.
Focus on long-term sustainability
The central bank said the measure would help ensure continued investment in the technology and infrastructure required to support India's rapidly expanding digital payments network.
“RBI remains committed to ensuring that UPI continues to be safe, seamless, affordable, and accessible,” the central bank said, while reiterating its focus on the long-term sustainability and growth of India's digital payments ecosystem.
UPI has become a major component of India's digital payments infrastructure, facilitating payments between individuals as well as transactions between consumers and merchants.
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