How is MDR calculated?

MDR is calculated as a percentage of the transaction amount, typically ranging from 0.3% to 2%, depending on the payment mode (debit/credit card, UPI, wallet) and the bank’s policy.

What is the merchant discount rate in RBI?

As per RBI, MDR is the fee charged to merchants for processing digital transactions through debit/credit cards, UPI, or wallets, shared among banks and payment providers.

How to calculate MDR rate?

MDR = (Transaction Amount × MDR %) – For example, if the MDR is 1% on a ₹1,000 transaction, the merchant receives ₹990 after deduction.

What is the MDR rate in India?

In India, MDR varies by payment mode: debit cards (0.3%–0.9%), credit cards (0.9%–2%), and UPI (mostly 0% for customers, absorbed by banks/government in many cases).

MDR is priced based on transaction value, payment instrument (debit/credit/UPI), and merchant category (small merchant, e-commerce, etc.).

Who pays the merchant discount rate?

MDR is technically paid by the merchant, as it is deducted from the transaction amount before settlement, while customers pay the full billed amount.

How to calculate MDR rate?

MDR = (Transaction Amount × MDR %) – For example, if the MDR is 1% on a ₹1,000 transaction, the merchant receives ₹990 after deduction.

How to calculate MDR rate?

MDR = (Transaction Amount × MDR %) – For example, if the MDR is 1% on a ₹1,000 transaction, the merchant receives ₹990 after deduction.

MDR is priced based on transaction value, payment instrument (debit/credit/UPI), and merchant category (small merchant, e-commerce, etc.).

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Merchant Discount Rates | Latest Guidelines and Implications for Businesses l Jaagruk Bharat

Alankar Mishra

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Updated: 26-08-2025 at 5:32 PM

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The growth of cashless payments in India through channels like debit and credit cards, UPIs, and mobile wallets is driving greater financial inclusion. Digital transactions enable purchasing convenience while powering small businesses with instant settlements and improved cash flows.

However, many citizens complain of merchants forcing them to pay additional percentage fees on card payments, though RBI guidelines explicitly prohibit this practice. Lack of awareness enables vendors to blatantly disregard rules and continue illegally extracting charges as high as 2-3% of transaction value from customers.

Let’s understand the Merchant discount rates in India with Merchant discount rates example and information on MDR charges on rupay credit card, GST on merchant discount rate, and Merchant discount rates calculator.

Overview

The table below summarises some key points concerning Merchant discount rates that one should know.

MDR rates	A fee paid by merchants to banks for accepting payments from customers via credit or debit cards or prepaid payment instruments
RBI rules on MDR	No extra charges on card payments, and compulsory acceptance of card payments
GST on merchant discount rate	18%
MDR charges on Rupay credit card	Minimal
How to calculate MDR?	Using the Merchant discount rates calculator

RBI Rules On Merchant Discount Rates In India

The merchant discount rate (MDR) is the fee paid by merchants to banks for accepting payments from customers via credit or debit cards or prepaid payment instruments.

As per RBI norms concerning MDR rate, merchants cannot:

charge any additional fee from customers for card payments.
Require minimum transaction amounts for accepting card payments.
Refuse card payments for lower ticket-size purchases.

The costs related to card processing are completely taken up by the merchant and their bank. Customers face no charges apart from applicable taxes.

This policy aims to promote cashless customer convenience and standardise payment acceptance infrastructure across India.

Common Tricks Adopted By Merchants To Collect MDR Charges

Despite strict RBI guidelines, merchants come up with innovative ways to recover their MDR charges from customers:

Explicitly asking for 2% fees on card payments.
Forcing the purchase of coupons for an amount higher than the bill value.
There are two different price lists, one higher for card payments.
Mandating card payment only above a certain bill amount.
Refusing cards for low-ticket transactions.

These tactics allow shops and outlets to easily blend and pass off charges within transactions. Customers end up paying more for card payments, though RBI regulations prohibit this practice.

How To Tackle Overcharging By Merchants?

Some steps to counter additional charges demanded by sellers on card payments are laid out below in brief points for one’s reference:

1. Politely inform about RBI Rules: Educate vendors that charging customers is illegal. If done respectfully, some revert to such demands.

2. Pay Only Listed Rates: Clearly state that you will pay only the officially displayed rates via any mode. Additional fees cannot be charged to the customer.

3. Cancel Transaction: Walk out, refusing service if forced to pay more for cards. This draws the attention of other customers, prompting sellers to reconsider policies.

4. Demand Bill Breakup: Ask vendors to provide a proper bill breakup, clearly mentioning all of the applied charges. This creates transparency, exposing misleading claims.

5. Threaten Reporting: Warn misbehaving merchants about complaining to their head office or the RBI officials. Fear of suspended licenses often helps halt such offenders.

6. Leave Negative Reviews: Spread awareness through word-of-mouth and social media complaints against outlets charging illegal fees. This impacts brand image, driving policy changes.

7. File RBI Complaint: Last but not least, submit an official complaint to the banking regulator regarding additional charges imposed by merchants in violation of rules. Strict penalties often force refunds along with compliance.

Conclusion

By taking such apt and strong measures and standing your ground against these merchants and banks by staying educated, you can be the push towards change that will help inspire and vocalise other people as well.

With the help of social media, word of mouth, and various other ways of communicating, people can be made more aware of these ‘behind the scenes’ sorts of scams that even a person with a keen eye would overlook.

So, let us all stay educated to steer clear and help others steer clear of such dishonest acts.

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