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Is MDR Killing Rupay Credit Cards on UPI? A Harsh Reality Check!

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Fini7777

Fini7777

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I've been observing for the past few months that several merchants around me are disabling Rupay credit card acceptance on UPI due to MDR (Merchant Discount Rate) charges for transactions above ₹2,000. Ironically, most Rupay credit cards offer rewards only on transactions above this limit. This creates a frustrating situation for users who expect seamless and rewarding payments via Rupay credit cards on UPI.

The main objective of introducing Rupay credit cards on UPI was to boost digital payments, encourage credit card adoption, and provide a scan & pay feature for small merchants who lack POS machines. This system benefits merchants by increasing their customer base, as credit cards offer purchasing flexibility and deferred payments, which ultimately drive economic growth.

But is MDR killing Rupay credit card adoption on UPI?​

I believe yes, and here’s why:

1️⃣ Merchants disabling Rupay credit card acceptance on UPI due to high MDR.
2️⃣ Misinformation among small merchants—some believe MDR applies to all transactions, whereas it is only applicable for transactions above ₹2,000.
3️⃣ Merchants demanding MDR charges from users to accept Rupay credit card UPI payments, making rewards meaningless.
4️⃣ Lack of awareness among merchants about the benefits of accepting Rupay credit cards.

The core objective of Rupay credit cards for UPI transactions is slowly getting diluted. While many banks offer rewards for payments above ₹2,000, if merchants either refuse to accept them or charge extra MDR, it defeats the whole purpose—leaving users with zero benefits.

Now, the big question: Who is to blame?
👉 Merchants who disable this feature to avoid extra charges?
👉 Banks/Government for imposing MDR on merchants?

I’m not here to blame banks or the government—after all, maintaining payment infrastructure does come at a cost. But the reality is, MDR is discouraging small merchants from enabling this feature, affecting both users and digital payment adoption.

What are your thoughts? Have you faced similar issues while using Rupay credit cards on UPI?
 
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Now almost all merchants who are having some knowledge have diabled UPI-CC. Only the small shops/vegetable sellers are still accepting UPI-CC, mostly purely out of ignorance. They also do not get impacted as very rarely one purchase vegetables for mreo than 2K at one go.
The issue lies in the way MDR on UPI-CC is charged. Most POS users have negotiated lower than standard MDR for direct card use. But UPI-CC MDR is set high. So POS MDR works lower for them. Unless NPCI accepts to lower MDR rates, soon UPI-CC would be only like some govt announcements, available only on paper but not in real world.
For paying phonepe QR merchants, there is an alternate option of paying via phonepe gift cards which is still giving some discounts, at least for Amz CC holders, but that also may not last for long.
 
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Raavan said:
Another thing i have noticed is that with PhonePe merchant app we can disable RuPay credit card on upi altogether.
There should be option to enable payments below 2k atleast, but we can either enable or disable the RuPay card irrespective of amount of transaction.
Click to expand...
Fini7777 said:
Yes, it's a good idea and if implemented this will be a partial solution to this issue
Click to expand...


MDR (1).webp
 
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Fini7777 said:
I've been observing for the past few months that several merchants around me are disabling Rupay credit card acceptance on UPI due to MDR (Merchant Discount Rate) charges for transactions above ₹2,000. Ironically, most Rupay credit cards offer rewards only on transactions above this limit. This creates a frustrating situation for users who expect seamless and rewarding payments via Rupay credit cards on UPI.

The main objective of introducing Rupay credit cards on UPI was to boost digital payments, encourage credit card adoption, and provide a scan & pay feature for small merchants who lack POS machines. This system benefits merchants by increasing their customer base, as credit cards offer purchasing flexibility and deferred payments, which ultimately drive economic growth.

But is MDR killing Rupay credit card adoption on UPI?​

I believe yes, and here’s why:

1️⃣ Merchants disabling Rupay credit card acceptance on UPI due to high MDR.
2️⃣ Misinformation among small merchants—some believe MDR applies to all transactions, whereas it is only applicable for transactions above ₹2,000.
3️⃣ Merchants demanding MDR charges from users to accept Rupay credit card UPI payments, making rewards meaningless.
4️⃣ Lack of awareness among merchants about the benefits of accepting Rupay credit cards.

The core objective of Rupay credit cards for UPI transactions is slowly getting diluted. While many banks offer rewards for payments above ₹2,000, if merchants either refuse to accept them or charge extra MDR, it defeats the whole purpose—leaving users with zero benefits.

Now, the big question: Who is to blame?
👉 Merchants who disable this feature to avoid extra charges?
👉 Banks/Government for imposing MDR on merchants?

I’m not here to blame banks or the government—after all, maintaining payment infrastructure does come at a cost. But the reality is, MDR is discouraging small merchants from enabling this feature, affecting both users and digital payment adoption.

What are your thoughts? Have you faced similar issues while using Rupay credit cards on UPI?
Click to expand...
Op asked whom to blame ? @Abhishek012 is to be blamed
 
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panchabhut said:
Now almost all merchants who are having some knowledge have diabled UPI-CC. Only the small shops/vegetable sellers are still accepting UPI-CC, mostly purely out of ignorance. They also do not get impacted as very rarely one purchase vegetables for mreo than 2K at one go.
The issue lies in the way MDR on UPI-CC is charged. Most POS users have negotiated lower than standard MDR for direct card use. But UPI-CC MDR is set high. So POS MDR works lower for them. Unless NPCI accepts to lower MDR rates, soon UPI-CC would be only like some govt announcements, available only on paper but not in real world.
For paying phonepe QR merchants, there is an alternate option of paying via phonepe gift cards which is still giving some discounts, at least for Amz CC holders, but that also may not last for long.
Click to expand...
How can we blame small shopkeepers, when govt is the biggest culprit. Govt itself doesn't accept cc on upi payment for local train booking, uts app.
 
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telescope said:
How can we blame small shopkeepers, when govt is the biggest culprit. Govt itself doesn't accept cc on upi payment for local train booking, uts app.
Click to expand...
Many Govt websites are big merchants. They issue tenders even for making a small changes.

Secondly, the UTS app is a big merchant. They charge extra fees from customers for accepting credit card payments.

Credit cards on UPI will also incur extra charges because credit cards already have such fees, and UTS app is not a small merchant to qualify for the waiver on transactions under ₹2000.

UTS app has to maintain two UPI gateways. Accept direct bank UPI payments through one gateway and charge customers extra MDR fees for credit card on UPI payments through another gateway.

Then, there’s no shortage of fools in India who will use the CC on UPI gateway to pay via bank UPI and then blame the extra charges, saying, Look, the govt is charging fees on UPI.

This will send a negative message, and then some fool with a blue tick on Twitter will start barking loudly, claiming, Look, the govt is even charging extra fees on bank UPI payment. But in reality, it’s the CC on UPI gateway. However, who will explain that to them?

It’s better that those who want to pay using RuPay credit card simply enter the card details and make the payment.
 
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Abhishek012 said:
Many Govt websites are big merchants. They issue tenders even for making a small changes.

Secondly, the UTS app is a big merchant. They charge extra fees from customers for accepting credit card payments.

Credit cards on UPI will also incur extra charges because credit cards already have such fees, and UTS app is not a small merchant to qualify for the waiver on transactions under ₹2000.

UTS app has to maintain two UPI gateways. Accept direct bank UPI payments through one gateway and charge customers extra MDR fees for credit card on UPI payments through another gateway.

Then, there’s no shortage of fools in India who will use the CC on UPI gateway to pay via bank UPI and then blame the extra charges, saying, Look, the govt is charging fees on UPI.

This will send a negative message, and then some fool with a blue tick on Twitter will start barking loudly, claiming, Look, the govt is even charging extra fees on bank UPI payment. But in reality, it’s the CC on UPI gateway. However, who will explain that to them?

It’s better that those who want to pay using RuPay credit card simply enter the card details and make the payment.
Click to expand...
Okay commander .
 
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Abhishek012 said:
Well, look, there are two types of people here:
  1. Those who support MDR
  2. Those who don’t support MDR
The real answer is very, very complicated.

I’ll try to explain it one by one, in a very short manner, covering each point:
  1. MDR is necessary. Credit like product have higher risks, which is why MDR is also higher (Credit Card/CC on UPI etc).
  2. For small merchants, MDR is free for transactions under ₹2,000 (if the annual turnover is below ₹20 lakhs, MDR won’t apply for payments below ₹2,000).
  3. Many small merchants rotate money unnecessarily, crossing the ₹20 lakhs annual turnover limit, which triggers MDR charges.
  4. Many small merchants haven’t completed full KYC verification, which is why, by default, they can’t accept credit cards on UPI.
  5. Some merchants have blocked credit cards on UPI due to baseless fear caused by false news, like some news saying a pani puri seller got a tax notice, even though he was actually a hotel owner.
  6. There are also merchants who genuinely don’t want to pay MDR on credit card transactions via UPI, so they keep it blocked.
  7. If MDR fees are reduced to something like 0.25% and restrictions are removed, people might misuse credit cards for free bank transfers, which increases the risk of defaults for banks.
  8. Remember, rewards and cashback come from MDR fees. This is why MDR is higher for credit products.
  9. There’s also misinformation that MDR for credit cards on UPI is higher compare with direct credit card swipe, but that’s incorrect. People compare POS machines with QR codes like PhonePe or GPay etc.

    Listen carefully, If you have a Pinelabs or HDFC POS machine where the MDR fee is 1.2% or 1.5%, the same MDR (1.2% or 1.5%) will apply for credit cards on UPI. Generate UPI QR on your POS machine or online merchant account and accept payment via CC on UPI

    However, QR-based merchant platforms like GPay, Paytm, or PhonePe charge 1.9% to 3% MDR.

    Each company has its own MDR rates. So, the claim that MDR for credit cards on UPI is higher is incorrect.
  10. MDR charges also depend on the business category. For example, BharatPe QR charged 1.25% MDR for someone in the electronics category, while PhonePe charged 1.3% MDR for grocery category payments via credit cards on UPI.
    Incorrect registration under a business category can result in higher MDR charges and many small merchants aren’t aware of this.
  11. If you carefully read points 9 and 10, you’ll notice that in many clubs, bars, big malls, grocery stores etc, when you try to pay using the QR codes issued by Paytm, GPay, or PhonePe, credit card on UPI will be disabled.

    However, if you ask for their POS machine and swipe your credit card, the payment will go through easily.

    In such cases, both customers and merchants think that MDR for credit cards on UPI is higher. But in reality, the MDR for Paytm, GPay, or PhonePe QR is higher.

    If you generate a QR code on their POS machine and pay via credit card on UPI, the merchant will have to pay the same MDR they are paying for credit card swipes.
Recently, a Technofino member also confirmed this on his POS machine.
But not every merchant and customer is that smart -

SilentVoyager

Post in thread 'Payment Gateway MDR Negotiations'

Abhishek012 said:
CC on UPI also same charges ?
Click to expand...
Yes, Rupay CC UPI would attract 1.2% MDR.
  • Hehe
Click to expand...
  1. While there’s no direct link, it is indirectly true, and I agree.
  2. This is the real issue. Many small and mid-sized merchants disable RuPay CC payments due to a lack of awareness.
    • Example: A small vegetable vendor who rarely receives payments above ₹2,000 may panic if they are charged MDR once. In response, they switch payment partners or disable RuPay CC payments altogether.
  3. True in some cases. Some merchants unknowingly exceed ₹20 lakh turnover, but many are aware and deliberately keep turnover below ₹20 lakh to avoid taxes.
  4. Correct. Limited KYC merchants cannot enable RuPay credit card payments on platforms like GPay Biz and Paytm.
  5. True.
  6. It’s their choice, but they may be limiting their customer base by blocking credit card payments on UPI.
  7. Absolutely true. NPCI has already implemented multiple transaction restrictions to reduce misuse.
  8. Agreed.
  9. Yes. We use both HDFC and PhonePe QR, and you are correct—MDR varies across platforms.

The MDR Dilemma:​

As you mentioned, if MDR is too low, it becomes unsustainable for banks and the government to maintain the payment infrastructure.
On the other hand, if MDR is too high (especially on platforms like PhonePe and GPay), small merchants suffer since they depend heavily on these services.

For instance, my father uses both HDFC SmartHub and PhonePe for payments.
  • HDFC charges around 1.2% MDR
  • PhonePe charges nearly 2% MDR
Despite this, we still accept RuPay credit card payments.

The issue is that many merchants, due to misinformation or fear, disable RuPay CC payments even though:
  1. Their payments are mostly below ₹2,000.
  2. They don’t fall under the ₹20 lakh turnover bracket, meaning MDR wouldn’t apply to them in many cases.

Possible Solutions:​

  1. Regulate MDR fees across platforms
    • The government or banks should ensure that all payment platforms charge fair and standardized MDR rates.
  2. Awareness campaigns for small merchants
    • Educate merchants about the benefits of accepting RuPay credit cards.
    • Clarify that MDR is not applicable to most of them.
  3. Completely remove MDR but eliminate rewards/cashback
    • If MDR is removed, no cashback or rewards should be offered to prevent misuse.
    • This would encourage RuPay CC adoption, but strict regulations must be enforced to prevent money rotation.
  4. Standardize MDR across all platforms
    • Implement a minimum MDR rate for merchants while enforcing anti-rotation and anti-abuse measures.
Currently, there is already a restriction on RuPay CC transactions below ₹2,000, which helps control rotation.
 
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Abhishek012 said:
Then, there’s no shortage of fools in India who will use the CC on UPI gateway to pay via bank UPI and then blame the extra charges, saying, Look, the govt is charging fees on UPI.

This will send a negative message, and then some fool with a blue tick on Twitter will start barking loudly, claiming, Look, the govt is even charging extra fees on bank UPI payment. But in reality, it’s the CC on UPI gateway. However, who will explain that to them?

It’s better that those who want to pay using RuPay credit card simply enter the card details and make the payment.
Click to expand...
🤣 🤣 🤣 Cool...
 
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I will tell my experience as a customer. Many small shopkeepers and kirana stores do not have POS machine. They used to just operate in cash.
UPI made a huge difference to their business. With just a QR code, they can accept money in their bank account directly.
Now coming to shops with POS and QR, many times, even if we give the card, they tell "Sir if you have Gpay, please scan and pay" This is mainly because they don't want to go through the longer process of swiping the card. And since POS has been there for a while, they know that it will incur MDR charges. But never they thought people use credit card on UPI and same thing happens on QR code also.
They might be thinking people use bank accounts and directly money comes to them. That is the main reason why small shops who are unaware of this still keep CC on UPI ON. Only if they find out that QR will also deduct MDR charges, they will discourage it.
Otherwise, they have to set the 2k limit for CC on UPI.
In all other cases, card is still the winner.
 
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Fini7777 said:
Your thoughts on this
Click to expand...
Rbi
Bank
Card network
Merchant
Govt
Consumer
Abhishek012 said:
MDR is necessary.
Click to expand...
Rbi, card network ... , bank can't make the things free or lower the fee further

Govt. may help, but its not a right thing in long term

consumer wants credit and rewards, but don't want to bear the charges, almost every merchant agress to bear atleast 1% or 1.5% unless due to low profit margins (better c or dc) or they greedy 😅 like as we want rewards so we use cc or want credit but don't wish to pay interest 🤣
 
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Abhishek012 said:
Well, look, there are two types of people here:
  1. Those who support MDR
  2. Those who don’t support MDR
The real answer is very, very complicated.

I’ll try to explain it one by one, in a very short manner, covering each point:
  1. MDR is necessary. Credit like product have higher risks, which is why MDR is also higher (Credit Card/CC on UPI etc).
  2. For small merchants, MDR is free for transactions under ₹2,000 (if the annual turnover is below ₹20 lakhs, MDR won’t apply for payments below ₹2,000).
  3. Many small merchants rotate money unnecessarily, crossing the ₹20 lakhs annual turnover limit, which triggers MDR charges.
  4. Many small merchants haven’t completed full KYC verification, which is why, by default, they can’t accept credit cards on UPI.
  5. Some merchants have blocked credit cards on UPI due to baseless fear caused by false news, like some news saying a pani puri seller got a tax notice, even though he was actually a hotel owner.
  6. There are also merchants who genuinely don’t want to pay MDR on credit card transactions via UPI, so they keep it blocked.
  7. If MDR fees are reduced to something like 0.25% and restrictions are removed, people might misuse credit cards for free bank transfers, which increases the risk of defaults for banks.
  8. Remember, rewards and cashback come from MDR fees. This is why MDR is higher for credit products.
  9. There’s also misinformation that MDR for credit cards on UPI is higher compare with direct credit card swipe, but that’s incorrect. People compare POS machines with QR codes like PhonePe or GPay etc.

    Listen carefully, If you have a Pinelabs or HDFC POS machine where the MDR fee is 1.2% or 1.5%, the same MDR (1.2% or 1.5%) will apply for credit cards on UPI. Generate UPI QR on your POS machine or online merchant account and accept payment via CC on UPI

    However, QR-based merchant platforms like GPay, Paytm, or PhonePe charge 1.9% to 3% MDR.

    Each company has its own MDR rates. So, the claim that MDR for credit cards on UPI is higher is incorrect.
  10. MDR charges also depend on the business category. For example, BharatPe QR charged 1.25% MDR for someone in the electronics category, while PhonePe charged 1.3% MDR for grocery category payments via credit cards on UPI.
    Incorrect registration under a business category can result in higher MDR charges and many small merchants aren’t aware of this.
  11. If you carefully read points 9 and 10, you’ll notice that in many clubs, bars, big malls, grocery stores etc, when you try to pay using the QR codes issued by Paytm, GPay, or PhonePe, credit card on UPI will be disabled.

    However, if you ask for their POS machine and swipe your credit card, the payment will go through easily.

    In such cases, both customers and merchants think that MDR for credit cards on UPI is higher. But in reality, the MDR for Paytm, GPay, or PhonePe QR is higher.

    If you generate a QR code on their POS machine and pay via credit card on UPI, the merchant will have to pay the same MDR they are paying for credit card swipes.
Recently, a Technofino member also confirmed this on his POS machine.
But not every merchant and customer is that smart -

SilentVoyager

Post in thread 'Payment Gateway MDR Negotiations'

Abhishek012 said:
CC on UPI also same charges ?
Click to expand...
Yes, Rupay CC UPI would attract 1.2% MDR.
  • Hehe
Click to expand...
Raghav2006 said:
I agree with OP, from what I've observed the shops that have both POS and UPI scanners with credit cards enabled prefer POS rather than scan.
There is a medical store in my locality that accepts credit cards without issue even though most people here don't use them hence many times their POS machine isn't charged, I asked them if I should pay using my CC by scan they told me to avoid it as it's costly.
Click to expand...
The same type of incident happened with @Raghav2006 , which I explained in my points 9, 10 and 11. 🤣🤣

If you @Raghav2006 generate a UPI QR code from your medical store's POS machine and pay using a credit card on UPI, the medical store owner will have to pay the same MDR as they do for directly swiping a credit card on the POS machine.

A simple solution for this is that the merchant can print out static QR codes from the POS machine and display them in the shop, or they can contact the POS machine company, which will send a separate UPI QR code that can be kept in the shop, like this -

Pinelabs Plutus QR- Scan and Pay solution -

If the merchant has a Pine Labs POS machine, the same MDR charges will apply, which will be equal to the MDR for credit card swipes.

pinelabs pos.webp

​

HDFC Bank SmartHub Vyapar Payment Solutions: QR Codes (Scan and Pay) -
www.hdfcbank.com

Merchant QR Code Payment - Scan to Pay Solutions | HDFC Bank

Experience HDFC Bank Smarthub Vyapar secure merchant QR code payments for easy scan-and-pay transactions. Best UPI QR code payment solutions for MSME businesses.
www.hdfcbank.com www.hdfcbank.com
​

 
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Fini7777 said:
2️⃣ Misinformation among small merchants—some believe MDR applies to all transactions, whereas it is only applicable for transactions above ₹2,000.
Click to expand...
This... This is the problem. Most dont know they can set limits to transactions. Till 2k, if allowed UPI via card, it should be enabled by default.

Many dont know this and outright disabled the use of rupay on UPI. Defeats the purpose.

Now the blame... It can't be put on either of them frankly. The network system needs to be made profitable to work, whereas the kirana store owners with low margins can't lost more from their margins for survival.

(There are high margin restaurants who does not allow cc on upi.. nothing to say to them...)
 
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