Crashes, No Sound, or Screen Glitches?
Random freezes, missing sound and display glitches usually trace back to one bad driver. Find and replace yours safely.Free scan · under a minuteWindows Errors? Fix Them Before They Spread
Repair common Windows errors and clear accumulated junk for a smoother, more stable PC - no reinstall needed.Free scan · no reinstallFor an ordinary UPI payment from a bank account, a merchant should not treat MDR as a fee that can simply be added to your bill. The Reserve Bank of India records the Government’s direction that MDR not be collected on UPI and RuPay debit-card transactions from 1 January 2020. Customer charges, card-issuer costs and refunds are separate questions.
This guide explains who pays what, how PPI-on-UPI and RuPay credit-card payments differ, and what to do when a purchase is returned or your account is debited but the payment fails.
As an Amazon Associate I earn from qualifying purchases.
What is UPI MDR?
Merchant discount rate (MDR) is the payment-acceptance charge associated with a merchant receiving a digital payment. It is a merchant-side cost in systems where it applies: the acquiring bank, payment network and other participants may share the charge under the applicable arrangement.
For UPI in India, the key policy point is different from the way MDR works in many card schemes. The Reserve Bank of India’s Benchmarking India’s Payment Systems report records the Government’s direction that MDR should not be collected for UPI and RuPay debit-card transactions with effect from 1 January 2020. That is why a normal bank-account UPI transfer is not supposed to create a standard MDR line item for the merchant to recover from the customer.
#1 Best Overall
The rule does not make every UPI-linked product identical. The payment instrument, merchant classification and transaction state still matter. In particular, PPI-on-UPI, RuPay credit cards linked to UPI and Pay by Points have their own operating details.
Can a merchant charge extra for paying by UPI?
A merchant should not describe an added amount on an ordinary UPI bill as “UPI MDR” when the applicable policy says MDR is not collected. The no-MDR direction removes the ordinary merchant acceptance charge as a basis for a customer surcharge.
Do not confuse this with a merchant’s general pricing. A seller can set prices, taxes and disclosed service fees that apply under its normal terms, but an amount presented specifically as recovery of UPI MDR is not the same thing as a legitimate product price. If a shop displays one price for cash and another only because you use UPI, ask for an itemised bill and keep the payment confirmation. Questions about a particular surcharge can depend on the instrument and applicable consumer or payments rules, so seek advice from the bank or regulator when the facts are disputed.
There is a separate, explicit rule for debit cards: the Reserve Bank of India’s Rationalisation of MDR for Debit Card Transactions says merchants must not pass debit-card MDR charges to customers. That debit-card circular should not be stretched into a universal rule for every payment product, but it reinforces the need to identify the instrument before assessing a charge.
Who pays UPI MDR?
For ordinary UPI and RuPay debit-card transactions covered by the 1 January 2020 direction, there is no MDR for the merchant to collect in the usual way. The following comparison separates merchant MDR from customer charges and product-specific conditions.
| Payment type | What the official material says about charges | Important qualification |
|---|---|---|
| Bank-account UPI | MDR is not to be collected under the Government direction recorded by RBI. | Applies to the UPI/RuPay debit-card policy described in the RBI report; check later circulars for any amended product rules. |
| PPI on UPI | NPCI says there are no transaction charges payable by the customer or PPI holder, including when receiving such transactions. | This answer is specific to PPI-on-UPI; it is not a statement about interest or fees on a separate credit product. |
| RuPay credit card on UPI | Nil MDR is specified for small offline merchants for transactions up to ₹2,000. | The condition is narrow. Merchant category, offline status and amount must all be checked against the current operating circular. |
| Pay by Points | The merchant receives the full transaction amount under standard UPI settlement. | On a refund, points go back to the rewards account through the original payment method. |
The RuPay credit-card condition comes from NPCI’s Operating circular for RuPay Credit Cards linked to UPI. Because that circular sets a category and a ₹2,000 ceiling, it cannot be used to claim that every UPI transaction, every merchant or every amount has the same nil-MDR treatment.
Are there charges for PPI on UPI?
NPCI’s UPI FAQ answers the customer question directly: “There are no charges to be paid by the customer/ PPI holder for UPI transactions.” The statement covers PPI-on-UPI transaction charges, including receiving such transactions, according to the NPCI UPI Frequently Asked Questions.
Free tools Windows power users keep installed
One-click scans. No signup required.
A prepaid payment instrument (PPI) is not the same as a credit card. A linked credit product may have interest, late fees, annual fees or other issuer terms; those are determined by the relevant issuer agreement and are not UPI MDR. Before disputing a debit, identify whether the money came from a bank account, a PPI balance or a credit limit, then read the applicable statement and terms.
How RuPay credit-card payments on UPI differ
When a RuPay credit card is linked to UPI, the transaction is still initiated through UPI but settles against a credit-card account. NPCI’s operating circular gives a nil-MDR condition for small offline merchants and purchases up to ₹2,000. It does not establish a blanket nil-MDR rule for larger amounts, online merchants or other classifications.
Refunds and reversals in this arrangement are credited directly to the linked credit-card account, rather than returned to a bank account or PPI balance. Keep the original UPI reference number and the card statement entry so the issuer can trace the credit if it is not visible.
How to get a UPI refund for a returned purchase
A refund for returned goods or a rejected service is different from a failed payment. The purchase completed, so the merchant must initiate the refund through its banking channel. NPCI’s FAQ states: “Merchant will ask the bank to refund the charged amount as per the defined process.” The NPCI FAQ does not promise one universal refund time for every bank, merchant or payment instrument.
Quick wins for a faster PC:
Scan for outdated or missing drivers - takes under a minuteDriver Scan →Repair Windows errors before they cause bigger problemsFix Now →Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →- Confirm the transaction state. Check that the merchant actually received the payment and that your UPI app shows a successful transaction, not “failed” or “pending.”
- Request the merchant refund. Provide the UPI transaction ID, date, amount and the phone number or order reference used for the purchase. Ask the merchant to submit the refund through its bank’s defined process.
- Keep evidence. Save the invoice, return approval, chat or email, UPI confirmation and any refund reference. These details allow the merchant, acquiring bank and your bank to locate the transaction.
- Check the original funding source. A RuPay credit-card-on-UPI refund should appear on the credit-card account. A PPI transaction follows the applicable PPI balance process. Do not assume a card refund will appear in your savings-account statement.
- Escalate with the reference numbers. If the merchant says the refund was submitted but it is not credited, contact your bank or issuer with the transaction and refund references. The official FAQ describes the process but does not set a single guaranteed turnaround time.
Pay by Points refunds
NPCI’s Pay by Points FAQs say refunds use the original payment method: points are credited back to the rewards account, while the merchant receives the full transaction amount under standard UPI settlement. A points refund therefore should not be expected as cash in a bank account.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What happens if money is debited but the UPI payment fails?
This is a failed-debit or reversal case, not a merchant return. NPCI says UPI provides for real-time reversal when a transaction fails after the customer’s account is debited. If the reversal does not happen immediately, contact your bank, as directed in the NPCI UPI FAQ.
- Open the transaction details in your UPI app and record the UPI transaction ID, amount, date and status.
- Check the bank account statement to confirm whether the debit is posted, pending or already reversed.
- Do not pay a second time until you know whether the first attempt failed; otherwise you could create two successful payments.
- Contact the bank that holds the debited account if the money has not been reversed. Give the bank the transaction ID and the exact failure message.
- If the merchant also claims it received money, ask the merchant to verify its settlement before attempting another payment.
A failed debit and a completed purchase have different remedies: the first calls for an account reversal, while the second requires the merchant to request a refund. The sources do not establish one nationwide deadline for every bank, so retain the complaint number and follow the bank’s escalation route if the reversal remains outstanding.
Historical MDR figures: why older articles can mislead
Older pages may quote a BHIM UPI MDR of 0.30%, capped at ₹100 per transaction, effective 1 October 2019. That figure belongs to NPCI’s historical Rationalisation of BHIM UPI MDR announcement. It should not be presented as the current ordinary UPI rate because the RBI report records the later no-MDR direction effective 1 January 2020.
Recommended Free Tools
For context only, RBI’s 2022 report says UPI accounted for 68% of payment-system transactions and exceeded 5.4 billion transactions in March 2022; it also reports 21% compound annual growth in India’s payment-system transaction volume from 2017 to 2020. Those are dated historical statistics, not a live 2026 transaction count and not evidence that a particular merchant may add a fee.
What merchants need to arrange for UPI acceptance
NPCI’s FAQ explains that merchants partner with an acquiring bank for UPI infrastructure. In practice, a merchant should confirm the acquiring agreement, settlement account, reconciliation reports, refund procedure and support contact before accepting payments at scale. The acquiring arrangement is separate from whether a customer may be charged an MDR surcharge.
Quick Recap
- Verify which instruments the merchant accepts: bank-account UPI, PPI-on-UPI, RuPay credit card on UPI and any rewards-based option.
- Check the current NPCI and RBI circulars for merchant category, offline/online status and transaction thresholds.
- Reconcile every successful UPI reference with the order or invoice before releasing goods.
- Document who can submit refunds and how the merchant receives a refund reference.
- Train staff to distinguish a failed debit from a customer-initiated return.
Quick decision guide
- You were asked to pay “UPI MDR”: ask for an itemised bill and identify whether the payment was ordinary bank-account UPI or another instrument. The RBI-recorded no-MDR direction means the label should not be treated as an automatic customer charge.
- You used PPI on UPI: NPCI says the customer/PPI holder pays no UPI transaction charge.
- You returned a product: the merchant must request the refund through its bank; keep the transaction and return references.
- Your account was debited but payment failed: wait for the real-time reversal, then contact the debited-account bank if it does not occur immediately.
- You paid with Pay by Points: expect refunded points to return to the rewards account through the original payment method.
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
