Merchants Should Bear MDR Charges on Merchant Transactions: Financial Experts
New delhi: Financial experts have advised merchants to bear Merchant Discount Rate (MDR) charges on eligible merchant transactions instead of passing the cost on to customers.
According to experts, a 0.4% MDR charge is applicable to certain merchant UPI transactions above ₹2,000. To avoid the charge, some customers and merchants may attempt to split a larger bill into multiple transactions. For example, a ₹6,000 bill could be paid through three separate UPI transactions of ₹2,000 each.
Experts have warned that repeatedly splitting payments in this manner could trigger a bank's fraud-detection or risk-monitoring systems. Such transactions may be flagged as unusual or suspicious, potentially resulting in temporary restrictions on UPI services while the transaction is reviewed.
Financial experts have therefore advised customers to make payments according to the actual bill amount rather than deliberately splitting a single payment to avoid applicable charges.
MDR is a fee associated with processing certain digital merchant payments. The treatment of MDR charges can depend on the type of payment, transaction value and applicable rules.
Experts have also stressed that merchants should not improperly recover prohibited charges from customers by adding them separately to the bill. Customers who notice an additional charge related to UPI payments should check the bill and ask the merchant for clarification.
Consumers are advised to retain payment records and receipts in case they need to raise a complaint. They should also rely on official information from their bank, the payment service provider and relevant regulatory authorities for the latest rules regarding UPI transactions and MDR charges.
The clarification is particularly relevant as digital payments continue to become an increasingly common method of making merchant payments across India.