{"id":369555,"date":"2026-08-14T16:40:58","date_gmt":"2026-08-14T11:10:58","guid":{"rendered":"https:\/\/forumias.com\/blog\/?p=369555"},"modified":"2026-08-14T16:40:58","modified_gmt":"2026-08-14T11:10:58","slug":"merchant-discount-rate-mdr","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/merchant-discount-rate-mdr\/","title":{"rendered":"Merchant Discount Rate (MDR)"},"content":{"rendered":"<div class=\"content-box-green\">\n<p><strong>News:<\/strong> The government is exploring ways to make UPI financially sustainable by restoring MDR for selected transactions or introducing tiered incentives.<\/p>\n<\/div>\n<h2 class=\"red-h2-box\">About Merchant Discount Rate (MDR)<\/h2>\n<figure id=\"attachment_369613\" aria-describedby=\"caption-attachment-369613\" style=\"width: 398px\" class=\"wp-caption aligncenter\"><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\" wp-image-369613\" src=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/08\/Source-ToI-1.jpg?resize=398%2C526&#038;ssl=1\" alt=\"Merchant Discount Rate (MDR)\" width=\"398\" height=\"526\" srcset=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/08\/Source-ToI-1.jpg?resize=227%2C300&amp;ssl=1 227w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/08\/Source-ToI-1.jpg?w=661&amp;ssl=1 661w\" sizes=\"auto, (max-width: 398px) 100vw, 398px\" \/><figcaption id=\"caption-attachment-369613\" class=\"wp-caption-text\">Source &#8211; ToI<\/figcaption><\/figure>\n<ul>\n<li><strong>Merchant Discount Rate (MDR)<\/strong>\u00a0is the <strong>fee charged to merchants for accepting digital payments.<\/strong><\/li>\n<li><strong>Purpose:<\/strong> It <strong>covers costs<\/strong> incurred by <strong>banks, payment processors, payment gateways, and other payment infrastructure<\/strong> participants.<\/li>\n<li><strong>Mechanism:<\/strong>\n<ul>\n<li><strong>Payment Process:<\/strong> When a customer makes a digital payment, the merchant usually receives the transaction amount after MDR is deducted.<\/li>\n<li>Example: On a \u20b910,000 transaction <strong>with a 2% MDR, \u20b9200 is deducted and the merchant receives \u20b99,800.<\/strong><\/li>\n<\/ul>\n<\/li>\n<li><strong>Major Components:<\/strong> MDR consists of <strong>different fees paid<\/strong> to the entities involved in processing and completing a digital payment.\n<ul>\n<li><strong>Payment Processor Fee:<\/strong> Payment processors <strong>charge fees for<\/strong> handling <strong>transactions between merchants and banks.<\/strong><\/li>\n<li><strong>Interchange Fee:<\/strong> <strong>Card issuers charge fees<\/strong> for processing transactions.<\/li>\n<li><strong>Assessment Fee:<\/strong> <strong>Card networks charge fees<\/strong> for using their payment processing services.<\/li>\n<li><strong>Markup Fee:<\/strong> This fee is <strong>divided among entities involved in the transaction.<\/strong><\/li>\n<\/ul>\n<\/li>\n<li><strong>Key Features:<\/strong>\n<ul>\n<li><strong>Percentage-based:<\/strong> MDR is <strong>generally calculated as a percentage of the transaction value<\/strong>.<\/li>\n<li><strong>Variable:<\/strong> MDR is <strong>not a single fixed rate <\/strong>and <strong>can differ across payment modes<\/strong>, providers and applicable arrangements.<\/li>\n<li><strong>Additional Charges: <\/strong>Payment processors may charge additional <strong>fees for fraud prevention, chargeback handling and customer support.<\/strong><\/li>\n<li><strong>Settlement: <\/strong>MDR charges are <strong>automatically deducted from the merchant\u2019s account <\/strong>when the transaction batch is settled.<\/li>\n<li><strong>Business Cost: Merchants must consider MDR as part of their business costs<\/strong> while setting their prices.<\/li>\n<li><strong>UPI Position:UPI and RuPay debit card<\/strong> transactions were <strong>exempted from MDR under the government\u2019s zero-MDR<\/strong> <strong>framework<\/strong> in January 2020.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<table style=\"width: 100%; border-collapse: collapse; border-style: solid;\">\n<tbody>\n<tr>\n<td style=\"width: 100%;\">\n<h2 class=\"yellow-h2-box\">Report of\u00a0Parliament&#8217;s Standing Committee on Finance on MDR<\/h2>\n<ul>\n<li><strong>Committee\u2019s Recommendation:<\/strong> The Committee has called for a <strong>self-sustaining, tiered MDR framework<\/strong> for <strong>higher-value merchant transactions.<\/strong><\/li>\n<li><strong>Reason: <\/strong>The \u20b92,000 crore <strong>government support covers only around 10% of the industry&#8217;s actual operating costs,<\/strong> while estimated operational expenditure is \u20b920,700 crore.<\/li>\n<li><strong>Earlier Recommendation:<\/strong> The Committee had <strong>earlier asked the Department of Financial Services to examine the long-term financial viability<\/strong> of defined-benefit and incentive-based schemes.<\/li>\n<li><strong>Legal Action:<\/strong> Following its earlier recommendation, <strong>legislative provisions enabling a tiered MDR structure have now been introduced.<\/strong><\/li>\n<li><strong>Early Implementation:<\/strong> The Committee has urged <strong>faster notification and implementation<\/strong> because inadequate support <strong>may affect investment in cybersecurity, fraud prevention and payment infrastructure.<\/strong><\/li>\n<li><strong>Safeguards:<\/strong> The framework should <strong>protect small merchants and person-to-person transfers<\/strong> while moving towards a self-sustaining digital payments ecosystem.<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n","protected":false},"excerpt":{"rendered":"<p>News: The government is exploring ways to make UPI financially sustainable by restoring MDR for selected transactions or introducing tiered incentives. About Merchant Discount Rate (MDR) Merchant Discount Rate (MDR)\u00a0is the fee charged to merchants for accepting digital payments. Purpose: It covers costs incurred by banks, payment processors, payment gateways, and other payment infrastructure participants.&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/merchant-discount-rate-mdr\/\">Continue reading <span class=\"screen-reader-text\">Merchant Discount Rate (MDR)<\/span><\/a><\/p>\n","protected":false},"author":10401,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1566,3127,12039],"tags":[11872],"class_list":["post-369555","post","type-post","status-publish","format-standard","hentry","category-daily-factly-articles","category-economy","category-knolls","tag-9pm-daily-factly","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/369555","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10401"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=369555"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/369555\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=369555"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=369555"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=369555"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}