UPSC Prelims Practice Questions — RBI has enough funds to pay for UPI use

Q1. The legislative proposal to amend Section 10A of the Payment and Settlement Systems Act, 2007, as well as the annual incentive scheme that reimburses the payments industry for zero-charge BHIM-UPI transactions, are piloted within the Union Government by which one of the following?

  • A. The Department of Revenue in the Ministry of Finance, which administers the Income-tax Act, 1961
  • B. The Ministry of Electronics and Information Technology, which administers the Digital India programme
  • C. The Department of Financial Services in the Ministry of Finance, which deals with banking and payments policy
  • D. The Department of Payment and Settlement Systems of the Reserve Bank of India, which oversees payment operators

Q2. With reference to the proposed amendment to Section 10A of the Payment and Settlement Systems Act, 2007, consider the following statements: 1. The amendment, upon commencement, itself levies a Merchant Discount Rate on person-to-merchant UPI transactions above ₹2,000. 2. Section 10A, as it stands before the amendment, bars any charge on payments made through the electronic modes prescribed under Section 269SU of the Income-tax Act, 1961. 3. The amendment substitutes that linkage with one or more electronic modes of payment as the Central Government may, by notification, specify. Which of the statements given above is/are correct?

  1. The amendment, upon commencement, itself levies a Merchant Discount Rate on person-to-merchant UPI transactions above ₹2,000.
  2. Section 10A, as it stands before the amendment, bars any charge on payments made through the electronic modes prescribed under Section 269SU of the Income-tax Act, 1961.
  3. The amendment substitutes that linkage with one or more electronic modes of payment as the Central Government may, by notification, specify.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q3. Consider the following statements regarding the Reserve Bank of India's Economic Capital Framework and its surplus transfer to the Union Government: 1. The framework currently in use was adopted by the RBI in August 2019 on the recommendations of the Bimal Jalan Committee constituted in November 2018. 2. That Committee recommended that the Contingent Risk Buffer be maintained within a band of 5.5 to 6.5 per cent of the RBI's balance sheet. 3. For the accounting year 2025-26 the RBI transferred its entire disposable income as surplus and made no appropriation to the Contingent Risk Buffer. 4. The surplus transferred to the Union Government for 2025-26 was lower than the amount transferred for 2024-25. Which of the above is/are NOT correct?

  1. The framework currently in use was adopted by the RBI in August 2019 on the recommendations of the Bimal Jalan Committee constituted in November 2018.
  2. That Committee recommended that the Contingent Risk Buffer be maintained within a band of 5.5 to 6.5 per cent of the RBI's balance sheet.
  3. For the accounting year 2025-26 the RBI transferred its entire disposable income as surplus and made no appropriation to the Contingent Risk Buffer.
  4. The surplus transferred to the Union Government for 2025-26 was lower than the amount transferred for 2024-25.
  • A. 1 and 2
  • B. 3 and 4
  • C. 3 only
  • D. 2, 3 and 4

Q4. As approved by the Reserve Bank's Central Board for the accounting year 2025-26, the amount appropriated to the Contingent Risk Buffer was approximately how many times the amount appropriated to that buffer in the preceding accounting year?

  • A. About 1.2 times
  • B. About 1.8 times
  • C. About 2.4 times
  • D. About 3.6 times

Q5. In the institutional architecture of India's retail payments, the National Payments Corporation of India is correctly described as which one of the following?

  • A. A 'not for profit' company promoted by the Reserve Bank of India and the Indian Banks' Association, serving as the umbrella organisation for retail payments
  • B. A wholly owned subsidiary of the Reserve Bank of India set up under the Payment and Settlement Systems Act, 2007 to own and operate retail payment systems
  • C. A statutory body constituted by the Central Government under the Payment and Settlement Systems Act, 2007 to regulate and supervise retail payment systems
  • D. A public sector undertaking under the Ministry of Finance mandated to build and operate the country's retail payment and settlement infrastructure

Q6. Consider the following statements comparing the Unified Payments Interface at its inception with its position in 2025-26: 1. UPI went live in April 2016 with 21 banks, and the number of banks live on UPI had crossed 700 by March 2026. 2. Person-to-person transfers, rather than person-to-merchant payments, account for the larger share of UPI transaction volume. 3. UPI's transaction volume in 2025-26 exceeded 24,000 crore transactions, growing about 30 per cent over the previous year. Which of the statements given above is/are correct?

  1. UPI went live in April 2016 with 21 banks, and the number of banks live on UPI had crossed 700 by March 2026.
  2. Person-to-person transfers, rather than person-to-merchant payments, account for the larger share of UPI transaction volume.
  3. UPI's transaction volume in 2025-26 exceeded 24,000 crore transactions, growing about 30 per cent over the previous year.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q7. Consider the following statements about the zero-MDR regime for digital payments and the incentive scheme supporting it: 1. Zero MDR on RuPay debit card and BHIM-UPI transactions was introduced from January 2020 through amendments to the Payment and Settlement Systems Act, 2007 and the Income-tax Act, 1961. 2. Under the incentive scheme for low-value BHIM-UPI person-to-merchant transactions, the incentive is paid by the Government to the acquiring bank, which then shares it with the issuer bank, the payment service provider bank and app providers. 3. The incentive scheme applies only to person-to-merchant transactions of value above ₹2,000. 4. The Union Budget for 2026-27 discontinued the budgetary outlay for the UPI and RuPay debit card incentive scheme. Which of the above is/are NOT correct?

  1. Zero MDR on RuPay debit card and BHIM-UPI transactions was introduced from January 2020 through amendments to the Payment and Settlement Systems Act, 2007 and the Income-tax Act, 1961.
  2. Under the incentive scheme for low-value BHIM-UPI person-to-merchant transactions, the incentive is paid by the Government to the acquiring bank, which then shares it with the issuer bank, the payment service provider bank and app providers.
  3. The incentive scheme applies only to person-to-merchant transactions of value above ₹2,000.
  4. The Union Budget for 2026-27 discontinued the budgetary outlay for the UPI and RuPay debit card incentive scheme.
  • A. 1 and 2
  • B. 3 only
  • C. 3 and 4
  • D. 2, 3 and 4

Q8. As submitted by the Department of Financial Services to the Parliamentary Standing Committee on Finance, the Government's incentive scheme for zero-MDR transactions defrays approximately what share of the payments industry's actual costs?

  • A. About 5 per cent
  • B. About 11 per cent
  • C. About 22 per cent
  • D. About 35 per cent

Q9. Consider the following statements about the Merchant Discount Rate applicable to different payment instruments in India: 1. Since January 2020 all electronic payment instruments in India, including debit cards of every card network, have necessarily been subject to a zero-MDR regime. 2. The Reserve Bank has prescribed no ceiling on the Merchant Discount Rate applicable to credit card transactions, unlike debit cards. 3. For debit card transactions at merchants with annual turnover up to ₹20 lakh, MDR is capped at 0.40 per cent of transaction value subject to a maximum of ₹200 per transaction. Which of the statements given above is/are correct?

  1. Since January 2020 all electronic payment instruments in India, including debit cards of every card network, have necessarily been subject to a zero-MDR regime.
  2. The Reserve Bank has prescribed no ceiling on the Merchant Discount Rate applicable to credit card transactions, unlike debit cards.
  3. For debit card transactions at merchants with annual turnover up to ₹20 lakh, MDR is capped at 0.40 per cent of transaction value subject to a maximum of ₹200 per transaction.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q10. Under the Reserve Bank of India's rationalised structure of Merchant Discount Rate for debit card acceptance, the highest rate of MDR is applicable to which one of the following categories of transactions?

  • A. Card transactions at merchants having annual turnover exceeding ₹20 lakh
  • B. QR code-based card transactions at merchants having annual turnover up to ₹20 lakh
  • C. Point-of-sale card transactions at merchants having annual turnover up to ₹20 lakh
  • D. Online card transactions at merchants having annual turnover up to ₹20 lakh

Q11. Under the Payments Regulatory Board Regulations, 2025, the body that has taken over the functions of the Board for Regulation and Supervision of Payment and Settlement Systems is correctly described as which one of the following?

  • A. A six-member board chaired by the Governor of the Reserve Bank of India, three of whose members are nominated by the Central Government
  • B. A six-member board chaired by the Finance Secretary of the Union Government, three of whose members are nominated by the Reserve Bank of India
  • C. A committee of the Central Board of the Reserve Bank of India composed wholly of Deputy Governors and other officers of the Reserve Bank
  • D. An autonomous statutory regulator outside the Reserve Bank of India, headed by a chairperson appointed by the Central Government

Q12. Consider the following statements about the performance of the Unified Payments Interface in 2025-26: 1. UPI processed over 24,000 crore transactions valued at about ₹314 lakh crore during the year. 2. UPI accounted for roughly 85 per cent of India's digital payment volumes. 3. UPI accounted for close to 49 per cent of global real-time payment transaction volume. 4. UPI's value of transactions grew faster during the year than its volume of transactions. Which of the above is/are NOT correct?

  1. UPI processed over 24,000 crore transactions valued at about ₹314 lakh crore during the year.
  2. UPI accounted for roughly 85 per cent of India's digital payment volumes.
  3. UPI accounted for close to 49 per cent of global real-time payment transaction volume.
  4. UPI's value of transactions grew faster during the year than its volume of transactions.
  • A. 1 and 3
  • B. 2 and 4
  • C. 1, 2 and 4
  • D. 4 only