Merchant Discount Rate (MDR): Definition, Meaning & Guide for Indian Businesses

MDR is the percentage fee a merchant pays the payment gateway / bank network for each card or digital transaction. Typically 1.8%-2.5% for credit cards, lower for debit / UPI.

What is Merchant Discount Rate (MDR)?

Merchant Discount Rate (MDR) is the combined commission paid out of every digital transaction — split between the issuing bank, the acquiring bank and the card network (Visa/Mastercard/Rupay). On a ₹1,000 sale at 2% MDR, ₹20 goes to the network and ₹980 reaches your bank account. RBI mandates ZERO MDR on UPI P2M and RuPay debit cards up to ₹2,000 — a major cost saving for SMBs. Credit card MDR is typically 1.8%-2.5% but is negotiable above ₹50 cr annual GMV. Always quote prices inclusive of MDR so the cost is built into your unit economics, not absorbed margin.