Merchant Discount Rate

Merchant Discount Rate Latest News

As per the recently introduced incentive scheme to promote low-value BHIM-UPI transactions, small merchants will pay no merchant discount rate (MDR) and banks will receive an incentive of 0.15% per transaction.

About Merchant Discount Rate 

• MDR (alternatively referred to as the Transaction Discount Rate or TDR) is a fee that merchants and other businesses must pay to a payment processing company for accepting payments from customers via digital modes like credit cards, debit cards, UPI, etc.
• MDR compensates the bank issuing the card, the bank which installs the PoS (Point of Sale) terminal and network providers, and payment gateways for their services.
• The MDR sums up all the charges and taxes that electronic or digital payments entail.
• The MDR typically comes in the form of a percentage of the transaction amount. It is typically between 1% and 3%.
• The rates are dependent on the level of business transactions being processed, the types of cards (debit or credit) used by customers, and the value of the average transaction (also known as average tickets or average sales).
• Before accepting debit and credit cards, merchants must set up this service and agree to the rate.
• Merchants must consider these fees as part of managing their business costs and setting their prices.
• MDR charges are automatically deducted from the merchant’s account at the time of settling the transaction batch.
• Under the rules laid down by RBI, business owners cannot pass on the MDR charges to their customers.

Merchant Discount Rate FAQs

Q1. Who should pay MDR charges?

Ans. MDR is the fee merchants pay to banks and service providers for accepting digital payments.

Q2. What is a Payment Gateway?

Ans. It is a software service that connects your bank account to the platform where you need to transfer your money.

Q3. What is a PoS (Point of Sale) terminal?

Ans. A Point of Sale (PoS) terminal is a device or system used by merchants to process payments from customers.

Source: TOI