Why is MDR charged on RuPay Credit Card UPI and How to avoid it?

MDR can be seen as a processing fee charged by payment gateways, payment networks like Visa, Mastercard, RuPay, American Express or Discover. It is applicable on payments made using debit cards, credit cards or in some cases net banking and digital wallets.

MDR is charged as a percentage of the transaction amount and usually ranges from 2% to 3%. So, for example, if you make a payment worth Rs. 10,000 using your credit card and the MDR is 2%, the merchant will have to pay Rs. 200 to the service provider. Note that this is only an example; actual MDR may vary for different transactions and merchants. In fact, merchants can also negotiate a lower MDR especially those with higher monthly or annual transaction volumes.

MDR is charged to cover the cost of processing digital payments. These charges help payment service providers and acquiring banks cover transaction processing costs. As per NPCI, the amount is distributed within the UPI ecosystem to improve its infrastructure, security, innovation and customer service.

As announced by NPCI earlier this year, for certain UPI transactions above Rs. 2,000, 0.4% MDR charges may apply depending on the payment instrument and merchant category. For UPI transactions above Rs. 75,000, the MDR will be capped at Rs. 300. There will be no impact on UPI transactions below Rs. 2,000. These rules are applicable on UPI transactions made via bank account as well as UPI-enabled RuPay credit cards.

An important point to note here is that MDR is a merchant-side charge and does not automatically mean that the customers must pay the additional fee.

• MDR will be charged on Person-to-Merchant UPI transactions above Rs. 2,000 made via bank account or UPI-enabled RuPay credit card
• The rate will be 0.4% for these transactions
• For transactions above Rs. 75,000, MDR will be capped at Rs. 300
• Person-to-person UPI payments will not carry any additional charges

Note that NPCI has laid down a baseline rate of 0.4% which is quite reasonable as compared to the MDR on debit card and credit card transactions. However, rates may vary for different merchant categories and as per other classifications.

MDR on UPI transactions was expected to take effect from 15^th Oct 2026 but has been indefinitely postponed the implementation, without specifying an exact date.

MDR is generally a charge levied on the merchant by the payment service provider for processing transactions. Merchants should not automatically pass this cost on to customers as an additional fee. Whether any surcharge is permitted depends on the applicable regulations and payment network rules.

If the merchant is passing on the MDR to the consumers by adding it to the cost of the product, consumers can choose alternative payment methods like paying in cash or through a credit card or debit card.