Summary of this article
UPI MDR varies by transaction value and merchant category.
Higher-value payments can attract percentage-based or capped charges.
Cards and specialised sectors follow different MDR structures.
All digital payments may look identical to consumers, but the cost for merchants can vary based on the transaction value and payment category. Different merchant discount rates (MDRs), caps and concessions apply to different types of transactions.
For standard merchant transactions, payments below Rs 2,000 carry nil MDR. Qualifying transactions above Rs 2,000 carry an MDR of 0.40 per cent, capped at Rs 300 for transactions of Rs 75,000 and above.
How MDR Is Calculated On Different Transaction Values
The MDR is calculated as a percentage of the transaction value until the maximum cap is reached. A purchase of Rs 3,000 at 0.40 per cent attracts an MDR of Rs 12, while a Rs 50,000 payment attracts Rs 200.
For a transaction of Rs 1 lakh, 0.40 per cent would come to Rs 400. However, the Rs 300 cap applies to transactions of Rs 75,000 and above, so the applicable MDR is Rs 300.
Says Sameer Mathur, managing director and founder, Roinet Solution: “Transactions below Rs 2,000 continue to remain free from MDR. So, there is no change on this front. For transactions above Rs 2,000, an MDR of 0.40 per cent applies. However, it has been clearly stated that merchants should not pass this charge to retail customers, which means the end consumer should not be impacted.”
UPI, Debit And Credit Cards Have Different Costs
Unified Payments Interface (UPI), debit cards and credit cards have different merchant costs. This can become more relevant when the transaction value is higher.
Vishwanathan Iyer, senior associate professor and director (accreditation) at Great Lakes, Chennai, says: “UPI remains free to the consumer. For merchants, UPI payments up to Rs 2,000 remain free; qualifying higher-value payments cost of 0.40 per cent, capped at Rs 300.”
Iyer added: “RuPay debit remains zero-MDR, while other debit-card MDR can reach 0.90 per cent. Credit card MDR commonly ranges from 1.50-2.50 per cent.”
For a purchase of Rs 10,000, this translates to Rs 40 through UPI, up to Rs 90 through a non-RuPay debit card, and roughly Rs 150-250 through a credit card.
Could Merchant Preferences Change
The difference in payment acceptance costs could influence the options merchants prefer. Small businesses may have different considerations from businesses with higher transaction volumes.
Adds Mathur: “Small businesses receiving up to Rs 1 lakh will be exempt from MDR. This means small purchases made at local shops and other small businesses will not attract an MDR, keeping UPI an attractive option for low-value transactions.”
Iyer adds, “Merchants will compare the total cost of acceptance, not merely the headline charge.”
Credit-Linked UPI Payments Follow Separate Rules
The specified MDR structure applies to direct account-to-merchant UPI transactions. RuPay credit cards linked to UPI and pre-sanctioned bank credit lines follow separate credit product rules. These transactions should, therefore, not be treated in the same way as direct account-based UPI payments.
Special Rates Apply To Some Sectors
Capital market transactions involving mutual funds (MFs), securities, stockbrokers and dealers carry an MDR of 0.02 per cent, capped at Rs 300.
Insurance premium payments above Rs 2,000 carry a flat MDR of Rs 5. Fuel purchases above Rs 2,000 also carry an MDR of Rs 5, while payments below Rs 2,000 have nil MDR.
Utility payments, including electricity, water and piped natural gas (PNG), follow a flat MDR of Rs 5 flat above Rs 2,000. Educational fee payments up to Rs 2,000 carry nil MDR, while higher transactions can qualify for flat-fee or capped structures.
What Consumers Should Keep In mind
Consumers are not expected to pay the prescribed UPI MDR separately. They should, however, check the final payable amount, convenience fees, equated monthly instalment (EMI) costs, and discounts when choosing a payment method.
Mathur adds, “Consumers should remain mindful of how merchants handle such charges.”
Iyer further says, “Credit cards may provide a grace period, rewards, EMI options and stronger chargeback or dispute facilities, but only add value when the bill is repaid fully.”
