The Merchant Discount Rate (MDR) is a fee charged to a merchant for processing certain digital payments received through UPI. It is a merchant-side transaction cost for processing eligible UPI payments, distributed within the UPI ecosystem to support payment infrastructure, innovation, cybersecurity, and customer service.

For standard P2M transactions, UPI payments up to Rs. 2,000 remain free of MDR. The 0.4% MDR applies to eligible transactions above Rs. 2,000, subject to the applicable caps and special-category rules.

The framework also caps the MDR for high-value transactions. Once a standard P2M transaction reaches Rs. 75,000, the MDR is capped at Rs. 300 per transaction. For example, a Rs. 1 lakh UPI payment would ordinarily have an MDR of Rs. 400 (0.4%). However, because of the cap, the applicable MDR would be limited to Rs. 300.

P2PM is for small vendors receiving UPI payments directly into their bank accounts through UPI QR. Under the framework, eligible small merchants receiving up to Rs. 1 lakh per month through UPI can remain in this category with zero MDR.

Source:- https://financialservices.gov.in/sites/default/files/2026-09/