Budget 2022: Payments industry urges govt to abolish zero MDR regime

The government did away with merchant discount rate (MDR) on UPI and Rupay transactions, effective January 2020. Expressed as a percentage of any digital transaction at a point-of-sale terminal, MDR is the charge paid by a merchant to the bank, card network and the PoS provider for offline transactions and to the payment gateways for online purchases. Merchants here are shops (brick-and-mortar as well as online) where a customer swipes a card to pay for goods, and card networks are companies like Visa, Mastercard and Rupay.

“The central government and RBI (Reserve Bank of India) have played a catalytic role in development and growth of digital payments in the country and there by progressing towards achieving the goal of less-cash society. The industry appreciates the incentive of ₹1,300 crore to be reimbursed to banks which is another step in the direction to achieve the government’s goal of digital India and will help the industry sustain,” PCI said in a statement.

The industry expects a loss of ₹5,500 crore from UPI and RuPay MDR made zero. It said there remained a huge gap to cover so that everyone in the payments value chain gets their credit. With zero MDR, the government has taken away the ability of these Payment Service Providers (PSPs) to invest in and maintain the financial infrastructure they have built, it said.

PCI said it has requested the finance ministry to roll back the zero MDR regime for UPI and RuPay debit or to incentivise the industry with an amount of ₹4,000 crore to bridge the gap.

Vishwas Patel, chairman, Payments Council of India and director of Infibeam Avenues, said, “We request the government to consider a roll back of the zero MDR, with a view to broaden and significantly grow the merchant acceptance base particularly in the MSME space and also to facilitate the deployment of payments infrastructure by non-bank players who have been the biggest deployers of capital in this area for the past few years.”