UPI MDR charge: What the 0.4% merchant fee means

The National Payments Corporation of India announced on September 15 that UPI transactions exceeding Rs 2,000 will attract a 0.4% Merchant Discount Rate (MDR) from October 15. The charge will not apply to person-to-person transactions, which remain free. The MDR is capped at Rs 300 per transaction for amounts of Rs 75,000 or more.

MDR is a fee merchants pay when accepting digital payments, calculated as a percentage of transaction value and deducted by banks before crediting the merchant. Concerns have emerged among retailers and businesses ahead of the festival season, with some warning of potential price increases, though government guidelines prohibit direct passing of MDR charges to consumers.

Merchants cite existing pressures from inflation and logistics costs amid geopolitical tensions. However, the announcement aims to balance digital payment adoption with merchant sustainability, with the fee structure designed to limit impact on high-value transactions.