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The Payments Council of India (PCI), an industry body representing a diverse range of non-banking payment industry players, with 180 members, has submitted a formal letter to the Prime Minister Narendra Modi, seeking urgent reconsideration of the Zero Merchant Discount Rate (MDR) policy for Unified Payments Interface (UPI) and RuPay debit card transactions, according to a release.
The letter acknowledges the government's visionary leadership in promoting digital payments and financial inclusion, making India a global leader in digital transactions. It highlights the pressing financial sustainability concerns facing the digital payments ecosystem due to the continued Zero MDR policy, which has been in effect since January 2020, the release stated. While the government has provided financial incentives to offset some of the ecosystem's operational costs, the letter points out that the INR 1,500 crore allocation covers only a fraction of the estimated INR 10,000 crore annual cost required to maintain and expand UPI services. The PCI emphasized that sustaining India's digital payments growth would require continuous investments in innovation, cybersecurity, merchant onboarding, compliance, and IT infrastructure. To address this challenge, the industry proposes the introduction of an MDR for RuPay debit cards for all merchants and a reasonable MDR of 0.3% for UPI only for large merchants, the release stated. This approach aligns with existing MDR structures for other digital payment instruments, such as credit cards (approximately 2%) and non-RuPay debit cards (approximately 0.9%). The PCI assured the government that the introduction of nominal MDR for RuPay Debit cards and UPI (for large merchants) would not result in any operational disruption, even in the short term, as these merchants were already accustomed to MDR on other payment modes. The industry body highlights that approximately six crore merchants in India accept digital payments, out of which 90 per cent are categorised as Small Merchants as per the definition of RBI (turn over Rs. 20 L and below per annum), with around 50 lakh merchants categorized as large enterprises. Enabling MDR for Rupay Debit and UPI large merchants will ensure sustainable monetization for service providers without disrupting digital payment adoption at the grassroots level as the merchants already pay MDR for different payment systems, the release added. 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. The PCI has requested the Prime Minister's intervention in this matter and has sought an opportunity to present its case in greater detail. The industry body remains committed to working closely with the government and regulators to strengthen India's digital payments ecosystem while ensuring financial sustainability, the release added. (ANI)
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