RBI Grade BNABARD ESISEBI
In one line
A Merchant Discount Rate (MDR) framework for UPI has been introduced, effective 15 October 2026, applying to merchant transactions with specified exemptions.
Context
What MDR Is
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- A fee charged within the merchant payment ecosystem for processing digital transactions
- Applies to certain Person-to-Merchant (P2M) transactions
- Shared among banks, payment service providers and UPI app providers
- It is not a tax or government levy, and customers are not required to pay it
- Introduced under the Payment and Settlement Systems Act, 2007
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The Fee Structure
| Category | Rate |
|---|---|
| All P2P transactions | Zero, irrespective of value |
| P2M above ₹2,000 | 0.4 per cent |
| Transactions above ₹75,000 | Capped at ₹300 |
| Essential sectors — railways, telecom, fuel, insurance, utility bills, agricultural inputs | Flat ₹5 for payments over ₹2,000 |
| Capital market — mutual funds, securities, stockbrokers | 0.02 per cent, capped at ₹300 |
- No charges on payments up to ₹2,000 through RuPay debit cards either
Exemptions
- All P2P transactions — zero MDR
- P2M up to ₹2,000 — zero MDR
- Small merchants under P2PM — zero MDR up to ₹1 lakh monthly receipts
- UPI AutoPay and Mandates — including recurring utility bills, subscriptions and investments
Financial Inclusion Provision
- 5 per cent of collections will fund UPI adoption among small merchants
About UPI
- A real-time payment system enabling 24/7 instant, interoperable and secure transactions
- The world’s largest retail fast payment system by transaction volume
- Developed by the NPCI
- Key features: two-factor authentication, open API, single app integration across multiple bank accounts
International Acceptance
UPI is accepted in 11 countries: Greece, Maldives, UAE, Singapore, Bhutan, Nepal, Sri Lanka, France, Mauritius, Qatar and Cambodia
