What is MDR? UPI MDR charges explained in plain language

Merchant Discount Rate (MDR) is the fee a merchant pays to its bank or payment aggregator every time a customer pays digitally. It is expressed as a percentage of the transaction. The name is confusing: it is a fee on the merchant, not a discount for anyone.

MDR exists on cards, wallets and now, in a limited form, on UPI. It funds the payment network, fraud monitoring, settlement and the apps you pay with.

The merchant's provider (the acquirer) collects MDR and shares it with the customer's bank (the issuer) and the payment app. None of it comes out of the customer's account.

UPI ran with zero MDR from January 2020. Under the new UPI charges rules, specified merchants pay 0.4% on payments above ₹2,000, capped at ₹300, from October 15, 2026.

On a ₹10,000 payment, MDR is ₹40. On ₹1,00,000, it is ₹300. Use the MDR calculator for your own numbers.

A transaction charge is billed to the person paying. MDR is billed to the person receiving. Headlines that say "UPI users will pay 0.4%" mix the two up. The government's position is that consumers face no UPI transaction charges.

MDR is the cost of accepting payments, not the cost of making them. If you are a customer, it does not touch your account.