PCI Urges Reassessment of Zero MDR Policy to Sustain UPI Ecosystem

The Payments Council of India has urged Prime Minister Narendra Modi to reconsider the Zero Merchant Discount Rate (MDR) policy for UPI and RuPay debit cards. They argue that introducing a low MDR for large merchants could secure the sustainability and growth of India's digital payments sector.

The Payments Council of India (PCI) has called on Prime Minister Narendra Modi to re-evaluate the ongoing Zero Merchant Discount Rate (MDR) policy, which applies to Unified Payments Interface (UPI) and RuPay debit card transactions. According to an official statement, PCI, which comprises 180 members from various non-banking entities, emphasized the critical financial implications of the policy on the digital payments ecosystem.

Since its implementation in January 2020, the Zero MDR policy has raised sustainability concerns, despite government efforts to alleviate operational expenses. The INR 1,500 crore provided by the government significantly falls short of the estimated annual requirement of INR 10,000 crore needed for sustaining and expanding the UPI infrastructure. PCI suggests a nominal MDR for RuPay debit cards and a 0.3% MDR for UPI transactions involving large merchants to ensure long-term viability.

The proposal aligns with existing MDR rates for other payment methods, like credit and non-RuPay debit cards, and seeks to prevent disruption in merchant operations. Highlighting that 90% of India's approximately six crore digital payment-accepting merchants are small enterprises, PCI argues that the introduction of reasonable MDR rates will ensure financial sustainability without hindering grassroots digital payment adoption. The PCI seeks the Prime Minister's support and further dialogue on this vital issue.

(With inputs from agencies.)