Can merchants pass UPI charges to buyers? Key questions on MDR, its implementation answered
The finalized MDR framework and threshold structure will take effect from October 15, 2026, for the updating for software and billing systems.
The Merchant Discount Rate (MDR) on UPI payments above ₹2,000 introduced by the National Payments Corporation of India (NPCI) has raised several questions regarding its implementation and consequences. The NPCI clarified that merchants cannot pass on MDR charges to consumers while accepting payments through UPI, ensuring that buyers pay only the posted price.
The MDR is calculated based on specific transaction value thresholds, such as 0.4% for purchases over ₹2,000 and a fixed maximum cap of ₹300 for high-value purchases of ₹75,000 and above. Transactions under ₹2,000 do not incur any MDR. The NPCI emphasized that UPI's fee structure is significantly lower than traditional card-based transaction fees, with credit card MDRs typically ranging from 1.5% to 2.5% and debit card MDRs capped at 0.90%.
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