UPI MDR Returns: Will Your Kirana Bear the Cost?

The government is reintroducing a small fee on large UPI merchant transactions. You won't pay it directly, but your neighbourhood shopkeeper might — and that could quietly change how small stores accept digital payments.

Here's what happened: The government is reintroducing a Merchant Discount Rate on UPI transactions, meaning merchants — not consumers — will pay a small fee per payment processed through UPI.. Finance Minister Nirmala Sitharaman confirmed MDR is not a tax or cess but a service charge meant to fund and strengthen UPI payment infrastructure.. Fuel dealers, retailers, and industry bodies are pushing back hard, arguing that their thin profit margins make even a fraction-of-a-percent fee financially damaging at scale..

What you should do: Continue using UPI normally — the MDR is a merchant-side charge and will not appear as a deduction or surcharge on your payment.. Watch for any merchant adding a 'digital payment surcharge' at checkout — this is not permitted under current RBI rules; report it to RBI's Sachet portal if you see it.. If you run a small business or side hustle, check the final MDR slab notifications from NPCI to understand your applicable rate and factor it into your monthly operating costs..

Merchants cannot legally pass MDR on to customers as a surcharge under NPCI guidelines — if a shop asks you to pay extra for using UPI, you can refuse and report it.

For readers weighing their credit and loan options, our personal loan guide and CIBIL score resources put this update in context.