Ira Singh
Khabar Khabaron Ki, 25 March
The Payments Council of India (PCI), representing non-banking payment industry players, has urged the government to reconsider the Zero Merchant Discount Rate (MDR) policy for Unified Payments Interface (UPI) and RuPay debit card transactions. In a letter to Prime Minister Narendra Modi, PCI has reportedly raised concerns over the financial sustainability of the digital payments ecosystem, which has been impacted by the Zero MDR policy since its implementation in January 2020.
While the government has provided financial incentives to offset some operational costs, PCI emphasized that the Rs 1,500 crore allocation falls significantly short of the estimated Rs 10,000 crore required annually to maintain and expand UPI services. The council stressed that a sustainable revenue model is necessary for the long-term growth of digital payments in India.
According to information,last week, the government approved a Rs 1,500 crore incentive scheme aimed at promoting small-value BHIM-UPI (P2M) transactions up to Rs 2,000. Under this scheme, an incentive of 0.15% per transaction value will be provided for payments made by small merchants. Additionally, 80% of the admitted claim amount by acquiring banks will be disbursed without conditions across all quarters of the scheme.
PCI reportedly highlighted that sustaining the momentum of India’s digital payments sector requires continuous investments in innovation, cybersecurity, merchant onboarding, compliance, and IT infrastructure. To ensure long-term financial viability, the council proposed introducing MDR for RuPay debit cards across all merchant categories and implementing a reasonable MDR of 0.3% on UPI transactions for large merchants.
This proposal aligns with MDR structures for other digital payment instruments, where credit cards incur approximately 2% MDR and non-RuPay debit cards around 0.9%. The council reassured that the introduction of a nominal MDR for RuPay debit cards and UPI (for large merchants) would not cause operational disruptions, as these merchants are already familiar with MDR charges on other payment methods.
Industry experts assert that MDR is the backbone of the digital payments ecosystem, enabling service providers to sustain operations and drive innovation. Without it, the long-term sustainability of digital payment infrastructure is at risk. PCI emphasized that enabling MDR for RuPay debit and UPI transactions among large merchants would allow service providers to monetize sustainably while ensuring that digital payment adoption continues to grow at the grassroots level.