{"id":6615,"date":"2026-08-11T12:34:23","date_gmt":"2026-08-11T07:04:23","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=6615"},"modified":"2026-08-11T13:29:45","modified_gmt":"2026-08-11T07:59:45","slug":"what-is-merchant-discount-rate","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/what-is-merchant-discount-rate\/","title":{"rendered":"Merchant Discount Rate"},"content":{"rendered":"<h2><b>Merchant Discount Rate Latest News<\/b><\/h2>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The Govt recently said the proposed merchant discount rate (MDR) for UPI transactions will be nominal and apply only to a limited set of merchants for transactions above a threshold.<\/span><\/p>\n<h2><b>About Merchant Discount Rate\u00a0<\/b><\/h2>\n<ul>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">It is the<\/span><b> fee charged to a merchant<\/b><span style=\"font-weight: 400;\"> for<\/span><b> accepting a digital payment<\/b><span style=\"font-weight: 400;\">.\u00a0\u00a0<\/span><\/li>\n<li style=\"text-align: justify;\"><b>When a customer pays a business digitally,<\/b> <b>multiple parties<\/b><span style=\"font-weight: 400;\"> may be <\/span><b>involved <\/b><span style=\"font-weight: 400;\">in completing that transaction.\u00a0<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Depending on the payment mode, these may include the <\/span><b>merchant, payment gateway<\/b><span style=\"font-weight: 400;\"> or <\/span><b>payment aggregator, <\/b><span style=\"font-weight: 400;\">acquiring <\/span><b>bank, issuing bank, card network<\/b><span style=\"font-weight: 400;\"> or payment network, and other payment infrastructure participants.\u00a0<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">MDR is part of the commercial structure that supports this payment acceptance chain.\u00a0<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">For a merchant, MDR is best understood as a <\/span><b>cost of accepting a particular type of payment.\u00a0<\/b><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">When a customer makes a payment, the <\/span><b>merchant <\/b><span style=\"font-weight: 400;\">usually<\/span><b> receives the transaction amount after deduction of MDR.<\/b><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The MDR fees<\/span><b> cover a variety of costs<\/b><span style=\"font-weight: 400;\">, including:<\/span>\n<ul>\n<li style=\"text-align: justify;\"><b>Payment processor fee:<\/b><span style=\"font-weight: 400;\"> These fees are <\/span><b>charged by payment processors <\/b><span style=\"font-weight: 400;\">(companies that handle transactions between merchants and banks like Razorpay) for their services.<\/span><\/li>\n<li style=\"text-align: justify;\"><b>Interchange fee: <\/b><span style=\"font-weight: 400;\">These are fees <\/span><b>charged by card issuers (banks) <\/b><span style=\"font-weight: 400;\">to merchants for processing transactions.<\/span><\/li>\n<li style=\"text-align: justify;\"><b>Assessment fee: <\/b><span style=\"font-weight: 400;\">These are fees <\/span><b>charged by card networks (like Visa, <\/b><span style=\"font-weight: 400;\">RuPay and Mastercard) to merchants for using their payment processing services.<\/span><\/li>\n<li style=\"text-align: justify;\"><b>Markup fee<\/b><span style=\"font-weight: 400;\">: These are fees that are divided among the different entities involved in the transaction.<\/span><\/li>\n<li style=\"text-align: justify;\"><b>Additional fees:<\/b><span style=\"font-weight: 400;\"> Some payment processors may charge additional fees for <\/span><b>services like fraud prevention, chargeback handling,<\/b><span style=\"font-weight: 400;\"> and customer support.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">MDR is <\/span><b>not a single fixed rate<\/b><span style=\"font-weight: 400;\"> that applies to every business or every payment.\u00a0<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">It may <\/span><b>apply differently across cards, net banking, wallets, UPI, EMI, BNPL, QR, a<\/b><span style=\"font-weight: 400;\">nd other payment modes, depending on the provider and the applicable arrangement.\u00a0<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The MDR typically comes in the <\/span><b>form of a percentage of the transaction amount<\/b><span style=\"font-weight: 400;\">. It is typically between 1% and 3%.<\/span><\/li>\n<li style=\"text-align: justify;\"><b>Merchants <\/b><span style=\"font-weight: 400;\">must <\/span><b>consider these fees<\/b><span style=\"font-weight: 400;\"> as part of <\/span><b>managing their business costs<\/b><span style=\"font-weight: 400;\"> and setting their prices.<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">MDR charges are a<\/span><b>utomatically deducted from the merchant\u2019s account <\/b><span style=\"font-weight: 400;\">at the time of settling the transaction batch.<\/span><\/li>\n<\/ul>\n<h2><b>MDR on UPI<\/b><\/h2>\n<ul>\n<li style=\"text-align: justify;\"><b>When UPI was launched<\/b><span style=\"font-weight: 400;\"> in 2016,<\/span><b> MDR was applicable.\u00a0<\/b><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">But in January <\/span><b>2020<\/b><span style=\"font-weight: 400;\">, the<\/span><b> government removed MDR on UPI and RuPay debit cards <\/b><span style=\"font-weight: 400;\">to push mass adoption of digital payments.\u00a0<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">But zero MDR also meant banks, the National Payments Corporation of India (NPCI) and fintech startups got nothing from the transaction.\u00a0<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The <\/span><b>government <\/b><span style=\"font-weight: 400;\">has <\/span><b>compensated the industry through subsidies.\u00a0<\/b><\/li>\n<\/ul>\n<h2><b>Recent Changes Introduced in the Taxation and Other Laws (Amendment) Bill, 2026<\/b><\/h2>\n<ul>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">It empowers the government to<\/span><b> levy an MDR on select electronic payment modes,<\/b><span style=\"font-weight: 400;\"> with a <\/span><b>potential MDR of 0.25 percent to 0.4 percent on business-directed UPI transactions<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The finance ministry said <\/span><b>consumers will face no transaction charges<\/b><span style=\"font-weight: 400;\"> and that<\/span><b> all person-to-person (P2P) transfers <\/b><span style=\"font-weight: 400;\">will continue to be <\/span><b>free<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The government says it will <\/span><b>apply only to a limited set of merchant transactions above a certain value threshold<\/b><span style=\"font-weight: 400;\">, at a<\/span><b> nominal rate,<\/b><span style=\"font-weight: 400;\"> which will be far<\/span><b> lower than existing debit or credit card MDRs.\u00a0\u00a0\u00a0<\/b><\/li>\n<li style=\"text-align: justify;\"><b>Small merchants and person-to-merchant payments below that threshold<\/b><span style=\"font-weight: 400;\"> are expected to r<\/span><b>emain free,<\/b><span style=\"font-weight: 400;\"> to protect the digital-payments push among small businesses. <\/span><\/li>\n<\/ul>\n<p><strong>News: <a href=\"https:\/\/bfsi.economictimes.indiatimes.com\/articles\/proposed-mdr-for-upi-transactions-will-be-nominal\/133092167\" target=\"_blank\" rel=\"nofollow noopener\">ET<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Merchant Discount Rate (MDR) is a fee paid by businesses to payment processors for accepting digital payments via credit cards, debit cards, UPI, and more.<\/p>\n","protected":false},"author":5,"featured_media":6616,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[822,21,22,23],"class_list":["post-6615","post","type-post","status-publish","format-standard","has-post-thumbnail","category-upsc-prelims-current-affairs","tag-merchant-discount-rate","tag-prelims-pointers","tag-upsc-current-affairs","tag-upsc-prelims-current-affairs","no-featured-image-padding"],"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/6615","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=6615"}],"version-history":[{"count":2,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/6615\/revisions"}],"predecessor-version":[{"id":118599,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/6615\/revisions\/118599"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/6616"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=6615"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=6615"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=6615"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}