{"id":896,"date":"2026-09-16T11:06:09","date_gmt":"2026-09-16T11:06:09","guid":{"rendered":"https:\/\/gokiwi.in\/blog\/?p=896"},"modified":"2026-09-16T11:06:10","modified_gmt":"2026-09-16T11:06:10","slug":"merchant-discount-rate-mdr-upi","status":"publish","type":"post","link":"https:\/\/gokiwi.in\/blog\/merchant-discount-rate-mdr-upi\/","title":{"rendered":"Merchant Discount Rate (MDR) on UPI: What Changes for Our Payments?"},"content":{"rendered":"\n<p>MDR on UPI has raised a question for Indian shoppers: will we pay extra when we scan a QR code? The new framework, effective from 15 October 2026, keeps UPI payments free for consumers. It introduces a merchant fee on certain payments made directly from a bank account.<\/p>\n\n\n\n<p>At Kiwi, we want payment charges to be easy to understand. Let\u2019s look at who pays, which transactions qualify and why we need to treat credit-card-on-UPI payments separately.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Does MDR Mean?<\/h2>\n\n\n\n<p>Merchant Discount Rate, or MDR, is the fee a merchant pays for accepting a digital payment. Despite its name, it is not a shopping discount.<\/p>\n\n\n\n<p>We can think of it as a payment-processing cost. It supports the banks and payment providers that run the service. The government\u2019s September 2026 announcement aims to help fund UPI infrastructure, fraud prevention and customer support as usage grows.<\/p>\n\n\n\n<p>The new framework covers direct bank-account-to-merchant UPI payments. A payment to a business is called a person-to-merchant, or P2M, transaction.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Which Merchant Payments Will Attract a Fee?<\/h2>\n\n\n\n<p>We need to check both the amount and the merchant category. From 15 October, the announced rates are:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Standard P2M payments above \u20b92,000:<\/strong> 0.4% of the transaction value, capped at \u20b9300 per transaction.<\/li>\n\n\n\n<li><strong>Specified essential-service payments above \u20b92,000:<\/strong> a flat \u20b95 for categories such as railways, telecom, insurance, fuel and public utilities, including electricity, water and piped gas.<\/li>\n\n\n\n<li><strong>Capital-market payments:<\/strong> a separate 0.02% rate, capped at \u20b9300, for covered transactions, including mutual funds, securities and stockbrokers.<\/li>\n\n\n\n<li><strong>Education payments above \u20b92,000:<\/strong> concessional flat-fee or capped arrangements. The government FAQ does not give one exact rate for every education payment, so we should check the applicable merchant terms.<\/li>\n<\/ul>\n\n\n\n<p>These are merchant charges. Merchants cannot pass this MDR on to buyers, and UPI apps cannot add a platform fee for the UPI payment itself.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Stays Outside the New MDR?<\/h2>\n\n\n\n<p>We can separate the exemptions into four groups:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Payments up to \u20b92,000:<\/strong> direct bank-account UPI merchant payments remain free of MDR, including a payment of exactly \u20b92,000.<\/li>\n\n\n\n<li><strong>Personal transfers:<\/strong> sending money to friends or family, receiving money and moving money between our own accounts remain free within permitted transaction limits.<\/li>\n\n\n\n<li><strong>Eligible small merchants:<\/strong> vendors classified as Person-to-Person-Merchant, or P2PM, with UPI QR receipts up to \u20b91 lakh a month retain zero MDR. Their classification matters, even when one payment exceeds \u20b92,000.<\/li>\n\n\n\n<li><strong>UPI AutoPay and mandates:<\/strong> automated recurring payments, such as utility bills, OTT subscriptions and recurring investments, do not attract the prescribed MDR.<\/li>\n<\/ul>\n\n\n\n<p>That last distinction matters when we pay a bill. A one-off utility payment and an automated recurring payment can receive different MDR treatment. We should check how the payment is set up, rather than assume every bill follows the same rule.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How Do We Calculate the Standard MDR?<\/h2>\n\n\n\n<p>For a qualifying standard P2M payment, we multiply the full transaction amount by 0.4% and apply the \u20b9300 cap. We do not subtract \u20b92,000 before calculating the fee.<\/p>\n\n\n\n<p>Suppose we pay \u20b95,000 at a merchant covered by the standard rate. The calculation is \u20b95,000 \u00d7 0.4% = \u20b920. The merchant bears that MDR; it is not added to our purchase amount.<\/p>\n\n\n\n<p>At \u20b975,000, the calculation reaches \u20b9300. A \u20b91,00,000 payment would produce \u20b9400 before the cap, but the capped MDR is \u20b9300. These examples show the announced MDR component, without calculating any separate tax treatment.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Does the Same Rate Apply to RuPay Credit Cards on UPI?<\/h2>\n\n\n\n<p>We should keep bank-account UPI and credit-linked UPI separate. The government FAQ says RuPay credit cards linked to UPI and pre-sanctioned credit lines follow their own credit-product rules. The new 0.4% rate does not replace those rules.<\/p>\n\n\n\n<p>With Kiwi, we help users make eligible merchant payments using a RuPay credit card on UPI. Groceries and dining are everyday examples where merchant acceptance permits it. This credit-card payment flow does not support sending money to friends or family.<\/p>\n\n\n\n<p>We also need to distinguish merchant processing fees from cardholder costs. Card fees, repayment obligations and interest charges depend on the issuer\u2019s terms. An MDR announcement does not remove those obligations.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Make Our Next Scan Count<\/h3>\n\n\n\n<p>Once we understand the charges, we can focus on what a payment option offers. At Kiwi, we bring UPI on credit and cashback on eligible spends together. Explore <a href=\"https:\/\/gokiwi.in\/upi-credit-card\/\">UPI on credit with Kiwi<\/a> and discover what we offer for everyday merchant payments. Card approval and cashback remain subject to eligibility and the <a href=\"https:\/\/gokiwi.in\/terms-and-conditions\/\">applicable terms<\/a>.<\/p>\n\n\n\n<h5 class=\"wp-block-heading\"><strong>FAQs<\/strong><\/h5>\n\n\n\n<h6 class=\"wp-block-heading\"><strong>Do We Need to Replace an Existing Merchant QR Code?<\/strong><\/h6>\n\n\n\n<p class=\"has-small-font-size\">No. The government FAQ says existing QR codes can continue to work without replacement or re-registration because of this change.<\/p>\n\n\n\n<h6 class=\"wp-block-heading\"><strong>Is There a Monthly Fee Threshold for Individual Users?<\/strong><\/h6>\n\n\n\n<p class=\"has-small-font-size\">No. The framework does not introduce a monthly quota after which individual users pay UPI transaction fees. We still need to follow applicable bank and UPI transaction limits.<\/p>\n\n\n\n<h6 class=\"wp-block-heading\"><strong>What if Our Small Business Outgrows the P2PM Threshold?<\/strong><\/h6>\n\n\n\n<p class=\"has-small-font-size\">Banks monitor incoming UPI payments. Under the announced framework, a P2PM merchant receiving more than \u20b91 lakh a month for three consecutive months moves to the P2M category. We should confirm the classification with the acquiring bank.<\/p>\n\n\n\n<p class=\"has-small-font-size\"><strong>Disclaimer:<\/strong> The information provided in this article is for general informational and educational purposes only and should not be considered financial, banking, or payment advice. MDR rates, thresholds, merchant classifications, exemptions, and UPI payment rules may vary and are subject to applicable regulations and changes over time. Users and merchants should verify the latest applicable charges and requirements with their bank, payment provider, or relevant authority. Kiwi-related information is subject to applicable eligibility criteria, partner-bank requirements, product terms, conditions, and rewards policies.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>MDR on UPI has raised a question for Indian shoppers: will we pay extra when we scan a QR code? The new framework, effective from 15 October 2026, keeps UPI payments free for consumers. It introduces a merchant fee on certain payments made directly from a bank account. At Kiwi, we want payment charges to [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":899,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[48,63,60,62,10,61,58,20],"class_list":["post-896","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-upi","tag-digital-payments","tag-mdr","tag-merchant-discount-rate","tag-merchant-payments","tag-rupay-cards","tag-upi-mdr","tag-upi-payments","tag-upi-transaction"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>MDR on UPI: Charges, Exemptions and Who Pays | Kiwi<\/title>\n<meta name=\"description\" content=\"We explain MDR on UPI, the October 2026 changes and who pays. 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