Merchant Discount Rate

Merchant Discount Rate is the rate charged from merchants, by bank or payment aggregator, to process the debit card and credit card transactions. In other words, it is the total of all charges in a digital transaction.

Key Points

  • In the 2019 Union Budget, the Finance Minister announced that business establishments with turn-over above 50 crores should encourage people to use low-cost digital payment modes.
  • Later the Finance Minister also announced that there would not be any Merchant Discount Rate for the customers and merchants, from 1 January 2020 for payment modes including BHIM UPI, Aadhar Pay, NEFT, RTGS, Debit cards among others.

Paytm waives off charges on Merchant transactions

E-commerce and financial technology Paytm have made an announcement that it will waive off all charges on merchant transactions, and allow its merchant partners to accept payments through Paytm wallet, RuPay cards, and UPI apps without any charges.

Paytm will also provide an option for merchants to choose whether they want to receive the funds in the bank accounts or in their Paytm wallets.

Paytm will be absorbing Rs 600 crore in MDR charges in a year by banks for supporting MSMEs (micro, small and medium enterprises). This initiative will benefit over 17 million merchants on the platform.

Paytm will also provide loans worth Rs 1,000 crore to MSMEs by March 2021 through its “Merchant Lending Programme”.


NEFT i.e. National Electronic Funds Transfer (NEFT) is a digital or electronic system for transferring funds.  NEFT is maintained by RBI and allows customers to transfer funds between two NEFT enabled bank accounts on one on one basis. It was started in the year 2005.


RTGS i.e. real-time gross settlement is also a fund transfer system in which funds are transferred in real-time. It is operated by RBI in India and central banks in all other countries.

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