Zero Fees for Small UPI Payments as RBI Introduces Tiered MDR Model

The RBI’s new framework creates a clear distinction between small and large UPI transactions. All peer‑to‑peer payments, regardless of the amount, remain free of charge, preserving the original spirit of UPI as a zero‑cost transfer service.

For merchant payments up to Rs 2,000, the central bank has also waived any MDR, allowing small retailers and service providers to accept digital payments without incurring fees. This step is expected to encourage greater adoption among micro‑businesses that previously hesitated due to cost concerns.

Only when the transaction value crosses the Rs 2,000 mark will a modest MDR be levied. The rate is set at 0.4% for amounts up to Rs 75,000 and capped at Rs 300 for transactions above that level. Essential services operating on thin margins, such as rail tickets, telecom recharges and fuel purchases, will be charged a flat Rs 5 per transaction when the amount exceeds Rs 2,000.

By offering a fee‑free environment for low‑value payments while introducing a scalable charge for larger ones, the RBI aims to protect the ecosystem’s financial health without discouraging everyday users.