Roll back zero merchant discount rate on UPI, RuPay debit card payments, Industry body Payments Council of India writes to Finance Ministry

🔴 In a communication to the Finance Ministry, the PCI — which is the largest industry body for digital payment aggregators — said it expects a loss of Rs 5,500 crore from UPI and RuPay debit card payments as the MDR is zero.

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Though payments through UPI and RuPay debit cards do not attract any MDR, it is capped at 0.9 per cent for all other debit cards. (Photographer: Kanishka Sonthalia/Bloomberg)

The Payments Council of India (PCI) has sought rollback of zero merchant discount rate (MDR) regime for payments made through Unified Payments Interface (UPI) and RuPay debit cards.

In a communication to the Finance Ministry, the PCI — the largest industry body for digital payment aggregators — said it expects a loss of Rs 5,500 crore from UPI and RuPay debit card payments as the MDR on payment from these two options is capped at zero This, the industry body said, limits the aggregators’ ability to “invest in and maintain the financial infrastructure” the payment ecosystem that they have built.

“The payments industry hopes to have some relief which can then be used by them to further expand the digital payments infrastructure of the country and work on some new innovative initiatives to further the digital financial inclusion in the country,” the PCI said.

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Explained

Impact of MDR rollback

The removal of merchant discount rate, or MDR, for payments through Unified Payments Interface (UPI) — which accounts for more than half of the digital transactions — and RuPay debit cards could result in more charges for some customers, especially in the rural and semi-urban areas, which in turn could harm the proliferation of digital modes of payment.

MDR is a fee charged to merchants for processing of payments made through UPI, digital wallets, debit, and credit card. (Removed transactions from here).

With the proliferation of digital payments, most merchants that have set up the payments service facility and agree to a fee, which is often between 1 and 3 per cent.

Digital payments, especially through UPI and digital wallets have shot up over the last year, in terms of value and volume. Between January and December 2021, over 38 billion transactions worth nearly Rs 72 trillion were done just through UPI. Though payments through UPI and RuPay debit cards do not attract any MDR, it is capped at 0.9 per cent for all other debit cards.

The Union Cabinet had recently approved a package of Rs 1,300 crore as reimbursement to banks as compensation for the zero MDR, as well as to boost digital payments.