Payments industry body urges PM Modi to introduce MDR on UPI for large merchants & RuPay debit cards

The Payments Council of India (PCI) which represents digital payments companies has written to Prime Minister Narendra Modi, seeking the introduction of merchant discount rate (MDR) on UPI transactions and RuPay debit cards. The industry body has sought an MDR of 0.3% on UPI transactions only for large merchants and a nominal MDR on RuPay debit cards for all merchants. “This approach aligns with existing MDR structures for other digital payments instruments such as credit cards and non RuPay debit cards,” PCI said in a statement on Monday.

MDR is a fee charged by banks to merchants for providing digital payment services. The government last week approved a lower Rs 1,500 crore incentive scheme for the current financial year to promote low-value BHIM-UPI transactions, focusing on payments made to merchants. The allocation was half of the over Rs 3,000 crore subsidy in FY24.

PCI in the letter said that the Rs 1,500 crore allocation covers only a fraction of the estimated Rs 10,000 crore annual cost required to maintain and expand UPI services. “MDR is the lifeline of the digital payments ecosystem. Without it, the sustainability of the entire infrastructure is at risk. The introduction of a reasonable MDR for large merchant transactions will allow the industry to continue investing in innovation, cybersecurity, grievance redressal, and merchant support, ultimately ensuring that UPI continues to thrive,” PCI said in its submission. About six crore merchants in India currently accept digital payments of which 90% are categorised as small merchants with around 50 lakh merchants categorised as large enterprises.

Introduction of MDR on UPI merchant transactions has been a long pending demand of the fintech and broader payments industry which said that a zero MDR regime would render the system unsustainable. Amazon Pay, PhonePe, Paytm and Razorpay are among members of PCI.

(With TOI inputs)