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MDR (Merchant Discount Rate) is a merchant-side processing charge, chiefly associated with debit- and credit-card payments. Under a Government of India direction reported by the Reserve Bank of India (RBI), MDR is not to be collected on UPI and RuPay debit-card transactions from January 1, 2020. That does not establish that every payment instrument or service is free of every possible charge: merchants should distinguish MDR from separately disclosed fees and check their provider’s current terms.
What does MDR mean?
MDR stands for Merchant Discount Rate. The RBI defines it as “the rate charged to a merchant for payment processing services on debit / credit card transactions.” In practical terms, it is a merchant-side payment-processing charge, not automatically a fee charged to the customer.
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The term is most relevant when discussing card acceptance. Do not assume that a fee described by a provider under another name is MDR, or that the MDR rules for one payment instrument apply to another.
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Repair common Windows errors and clear accumulated junk for a smoother, more stable PC - no reinstall needed.Free scan · no reinstallDo merchants pay MDR on UPI payments?
The RBI reports that, from January 1, 2020, MDR shall not be collected for transactions through UPI and RuPay debit cards. The rule covers those specified transaction types; it is not a general declaration that every instrument, provider service, or ancillary service has no charge. See the RBI’s payment system directions and its 2019–20 Annual Report.
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The cited official material does not establish current provider-by-provider pricing, all possible charges for credit on UPI or prepaid instruments, or the latest terms of every payment provider. For a specific arrangement, confirm the instrument and review the provider’s current merchant fee schedule; do not infer its full cost from the zero-MDR direction alone.
How UPI charges differ from card MDR
UPI and card acceptance should be treated as distinct payment cases. The RBI’s UPI direction does not set card MDR rates, and the historical debit-card caps below are not UPI rates. For a merchant comparing arrangements, first identify the payment instrument and acceptance channel—such as an in-person terminal, QR acceptance, or online checkout—then check which fee components the provider lists for that arrangement.
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What were the RBI’s debit-card MDR caps?
An RBI circular established maximum MDR rates for debit-card transactions, effective January 1, 2018. The limits depended on the merchant’s turnover in the previous financial year and the acceptance method. These are historical debit-card caps, not UPI charges or a current provider price list.
| Merchant category | Physical POS, including online card transactions | QR-code-based card acceptance |
|---|---|---|
| Small merchants: previous-financial-year turnover up to ₹20 lakh | Maximum 0.40%, capped at ₹200 per transaction | Maximum 0.30%, capped at ₹200 per transaction |
| Other merchants | Maximum 0.90%, capped at ₹1,000 per transaction | Maximum 0.80%, capped at ₹1,000 per transaction |
These caps come from the RBI’s 2017 debit-card MDR circular. They describe maximum permitted debit-card MDR under that circular, not what a merchant necessarily pays under a current provider contract.
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Can a merchant pass MDR or other fees to the customer?
RBI guidance tells payment gateways and payment aggregators to ensure that merchants do not pass debit-card MDR to customers. It also requires other applicable charges, such as a convenience fee, to be disclosed before payment. A convenience fee is a distinct charge, not another name for MDR. The cited direction addresses debit-card MDR and does not, by itself, settle every instrument or legal circumstance. See the RBI’s guidance for payment gateways and payment aggregators.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What should merchants check when comparing payment arrangements?
Ask the provider to identify each charge and the transaction it applies to. RBI has directed acquiring banks to unbundle MDR by card type and explain charges to merchants. For a useful comparison, check:
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- Payment type: UPI, debit card, credit card, or prepaid instrument.
- Acceptance channel: in-person terminal, QR, or online checkout.
- Fee category: which items are MDR and which are separately named services or charges.
- Current terms: the provider’s merchant schedule and any applicable service disclosures.
RBI’s direction supports separating card categories; it does not establish a particular provider’s current fees, settlement terms, or service conditions. The RBI’s direction on unbundling MDR by card type is a useful reference when asking for a card-fee breakdown.
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