Why is the word “discount” used?
In this context, it refers to an amount deducted from the merchant’s proceeds rather than a promotional discount given to the customer. The customer’s payment amount and the amount credited to the merchant may therefore need to be reconciled through the settlement statement.
RBI’s discussion paper on payment-system charges explains MDR as a charge recovered by the acquirer from the merchant, commonly during settlement. The paper is used here for terminology; it is not being treated as an enacted universal tariff.
The actual rate and permitted treatment must come from the current rules and merchant agreement for the relevant payment product.
MDR, commission and service charge
| Item | What it concerns |
|---|---|
| MDR | Payment-acceptance cost under the acquiring arrangement |
| Retailer commission | Earnings payable under a retailer/provider agreement |
| Customer service charge | A charge collected for a particular service under its applicable terms |
| Shop profit | The business result after considering income and costs |
These may all affect a shop’s accounts, but they are not interchangeable labels. A commission quoted by a service provider does not automatically describe the cost of accepting the customer’s payment.
Our pricing page remains the place for SiOnline’s stated commercial terms. This glossary does not add a new SiOnline fee or change an existing commission arrangement.
Read the settlement statement carefully
Look for the original transaction amount, the identified deductions and the net amount credited. If the provider groups several charges together, ask for a clear breakdown rather than assume the entire difference is MDR.
RBI’s discussion paper distinguishes payment-acceptance charges from other services offered by intermediaries. For a practical review, match the statement labels to the merchant’s agreement and invoice.
If tax or another charge appears separately, preserve that label. The goal is to understand what was deducted and why, not to force every amount into one familiar acronym.
Is there one MDR for every payment?
No. Do not apply a number quoted for one payment product to every card, UPI arrangement, account or merchant category. Current statutory treatment, network rules and the specific acquiring arrangement matter.
Before comparing offers, ask the provider to state the applicable product, rate basis, additional charges, tax treatment and settlement terms in writing. A percentage without its conditions can be misleading.
Also do not assume a merchant may pass a charge to the customer merely because the merchant incurred it. Customer charging is a separate question governed by the relevant rules and agreement.
An example from a shop’s books
Illustrative example: A shop records a customer payment, then sees a smaller settlement credit. The owner describes the difference as “commission paid to the bank”.
The settlement statement instead needs to be read line by line. One deduction may concern payment acceptance, while another may concern a separately contracted service. The shop’s actual sales income and retailer commission records also need to remain distinct.
Once the labels are understood, the owner can ask a precise question about an unexpected charge. Asking only “why was my balance reduced?” without the transaction and settlement details makes the enquiry harder to resolve.
Questions about MDR
Is MDR the income a retailer earns?
No. It is a payment-acceptance charge concept. Retailer earnings follow a separate service agreement.
Does MDR always mean the same percentage?
No. Check the payment product, current rules and actual merchant agreement. This page intentionally gives no universal rate.
Can a glossary calculation establish my profit?
No. Profit depends on the business’s actual income and costs. Keep payment charges, service earnings and operating expenses separate when reviewing the shop’s records.