Reconsidering Zero MDR Policy for Sustaining Digital Payments

The Payments Council of India urges the government to reassess the Zero Merchant Discount Rate policy for UPI and RuPay transactions. The Council highlights financial sustainability concerns and suggests nominal MDRs to secure the digital payments ecosystem, ensuring sustainable monetisation and continued growth.

The Payments Council of India (PCI), representing non-banking payment entities, has made an appeal to the government to review the Zero Merchant Discount Rate (MDR) policy applied to Unified Payments Interface (UPI) and RuPay debit card transactions.

In correspondence to Prime Minister Narendra Modi, the PCI articulated pressing financial sustainability issues stemming from the ongoing Zero MDR policy, in place since January 2020. Despite government efforts to subsidize some operational expenses, a financial allocation of Rs 1,500 crore covers only a small portion of the Rs 10,000 crore needed annually to uphold and expand UPI services.

To address these shortcomings, the industry recommends implementing an MDR for RuPay debit cards across all merchants, and a 0.3 per cent MDR rate for UPI transactions exclusively involving large merchants. This proposal is in keeping with existing MDR structures for other payment methods, maintaining digital payment growth while ensuring a sustainable future for the ecosystem.

(With inputs from agencies.)