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Govt Plans Levying MDR On UPI Transactions Over INR 3,000: Report
- The government is considering imposing a merchant discount rate (MDR) on UPI transactions above INR 3,000 to support banks and payment service providers.
- Discussions are ongoing to apply MDR based on transaction value rather than merchant turnover, with a recent meeting held involving key departments.
- While smaller UPI payments may remain exempt, larger transactions could soon incur a merchant fee, reversing the zero-MDR policy in place since 2020.
- No official statement has been released by the PMO, department of economic affairs, or department of financial services.
- MDR is a fee banks charge merchants for processing real-time payments in the UPI ecosystem; it was waived off for RuPay debit cards in 2020 to promote digital payments.
- Indian banks proposed reinstating MDR on UPI and RuPay debit card transactions in March, seeking a reversal of the zero MDR policy.
- Third-party application providers have voiced concerns about rising costs for high-value UPI transactions as they aim to build sustainable business models.
- The zero-MDR policy has impacted revenue for fintech players and bankers, prompting calls for a return to MDR to ensure a sustainable ecosystem.
- Paytm's founder mentioned that reintroducing MDR would lead to increased revenues for digital payment providers but also heightened competition.
- NPCI data shows a new high in UPI transaction volume and value in May, indicating the significance of UPI transactions in India's digital payment landscape.
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