RBI Grade BNABARD ESISEBI
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Context: As the Unified Payments Interface completed 10 years of operation, Parliament passed the Taxation and Other Laws (Amendment) Bill, 2026, which amends Section 10A of the Payment and Settlement Systems Act, 2007, removing the statutory prohibition against levying a Merchant Discount Rate on UPI and RuPay debit card transactions.
“RBI MPC Unpacked: Key Theory Meets Today’s Macro Trends”Tap to play · from the C4S channel
What UPI Is
- Launched as a pilot in April 2016 by the RBI and NPCI, fully operational from August 2016.
- India’s real-time, interoperable mobile payment system, built on the Immediate Payment Service (IMPS) protocol.
- Allows instant bank-to-bank transfers via Virtual Payment Addresses (VPAs) or QR codes.
- Over a decade it has moved from a domestic retail experiment to the backbone of India’s digital economy, handling the vast majority of non-cash consumer payments.
Evolution and Growth Drivers
- Early policy vision (2012–13): the RBI’s payment vision documents identified IMPS as a foundation for rapid proliferation of mobile merchant and peer-to-person transfers.
- Demonetisation and pandemic (2016 and 2020): both catalysed a structural shift away from cash and cash-on-delivery toward contactless QR payments.
- Private venture capital inflow (2019–2021): large investments into fintech firms such as Paytm and PhonePe expanded Point-of-Sale infrastructure and user acquisition.
- Zero-MDR mandate (2020): following the Nandan Nilekani Committee recommendations on deepening digital payments, the government mandated 0% MDR on UPI and RuPay cards, subsidising low-value transactions up to ₹2,000.
The Proposed MDR Reform
A calibrated, threshold-based MDR is being evaluated, designed to ensure sustainability without discouraging small merchants or individual citizens:
| Category | Treatment |
|---|---|
| Consumers and P2P transfers | 100% free — guaranteed zero fee |
| Small merchants (annual turnover below ₹1–1.5 crore), including kirana stores | Zero merchant fees continue |
| Large commercial enterprises | Nominal MDR of about 0.05% to 0.3–0.6%, applying only to P2M transactions exceeding ₹2,000 |
