Supporting a government proposal to levy 0.4% fee on UPI transactions above Rs 2,000, the Reserve Bank of India (RBI) has said it is an important step towards strengthening the long-term sustainability of India’s digital payments ecosystem.

In a post on X, the central bank said the measure would help UPI to continue scaling, innovating and serving consumers and businesses across the country.

The government will introduce Merchant Discount Rate (MDR) on large-value UPI transactions from 15 October while those up to Rs 2,000 will continue to remain free. Person-to-person (P2P) transactions will also have no charge, irrespective of the amount. 

The RBI said a fair and appropriate distribution of MDR among ecosystem participants will support continued investment in technology, infrastructure and payment acceptance networks.

Such investments, it added, could enable wider UPI acceptance, deepen the customer base and support sustained growth in transaction volumes.

"RBI 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," it said.

UPI, which launched on 25 August 2016, is operated by the National Payments Corporation of India (NPCI), an initiative of RBI and the Indian Banks' Association. It runs real-time payments between individuals and enables customers to make payments directly to merchants while making purchases.