← 16 September 2026's Current Affairs · Economy GS-3 Prelims ★★★★☆ Mains ★★★★★
Government introduces Merchant Discount Rate on high-value UPI payments
Why in News?
Who runs UPI? Not the government — the NPCI angle behind the new 0.4% MDR
The government has notified a 0.4% Merchant Discount Rate on UPI merchant payments above Rs 2,000, while person-to-person transactions remain free.
Why it matters: asked in UPSC 2017; GS-3 core
What you need to know
2 min read
The government has notified a Merchant Discount Rate (MDR) of 0.4% on UPI transactions above Rs 2,000 made to merchants, while keeping person-to-person transactions and smaller merchant payments free of charge.
The Unified Payments Interface (UPI) is operated by the National Payments Corporation of India (NPCI), a not-for-profit entity set up under the guidance of the Reserve Bank of India.
The Finance Ministry has said the charge will apply to only a small fraction of merchant transactions by volume.
Sources: The Hindu · Topper IAS editorial
Key facts
Remember these
- MDR of 0.4% notified on UPI merchant payments above Rs 2,000
- Person-to-person UPI transactions remain free of charge
- UPI is operated by NPCI (National Payments Corporation of India)
- NPCI is a not-for-profit entity set up under RBI's guidance
- Finance Ministry says the charge applies to only a small fraction of merchant transactions by volume
Prelims · Mains
How the exam will ask it
Prelims
- The Merchant Discount Rate of 0.4% applies only to UPI payments made to merchants above Rs 2,000.
- Person-to-person UPI transfers are exempt from the Merchant Discount Rate irrespective of the amount.
- NPCI, the operator of UPI, is a not-for-profit organisation functioning under the guidance of the RBI.
Mains
GS Paper 3 - Indian Economy/digital payments: UPI's zero-MDR model since 2020 raised sustainability concerns for banks and NPCI, so the government's targeted 0.4% MDR on high-value merchant transactions above Rs 2,000 balances financial inclusion (keeping small-value and P2P transfers free) with the need for a commercially viable payments ecosystem. Way forward lies in monitoring the impact on merchant onboarding and digital adoption while ensuring the cost burden does not shift onto small merchants or consumers.
PYQ connection
A question UPSC has already asked on this
Consider the following statements:
- National Payments Corporation of India (NPCI) helps in promoting the financial inclusion in the country.
- NPCI has launched RuPay, a card payment scheme.
Which of the statements given above is/are correct?
- 1 only
- 2 only
- Both 1 and 2
- Neither 1 nor 2
Show answer
Answer: C
Why this matters: today's issue is directly connected to a concept UPSC has already tested. Read the story with this question in mind.
Practise this PYQ →Quick recall
Answer before you reveal
With reference to the Merchant Discount Rate (MDR) recently introduced on UPI transactions, consider the following statements:
- The 0.4% MDR applies to person-to-person UPI transactions above Rs 2,000.
- The Unified Payments Interface is operated by the National Payments Corporation of India.
Which of the statements given above is/are correct?
- 1 only
- 2 only
- Both 1 and 2
- Neither 1 nor 2
Show answer
Answer: B — The 0.4% MDR applies only to merchant transactions above Rs 2,000; person-to-person transfers remain free, making statement 1 incorrect. UPI is operated by the National Payments Corporation of India (NPCI), making statement 2 correct.
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