Indian Payments Council's Appeal to PM Modi

The Payments Council of India (PCI), representing digital payments companies, has reached out to Prime Minister Narendra Modi with a significant request. They are advocating for the introduction of a Merchant Discount Rate (MDR) on UPI transactions and RuPay debit cards to ensure the sustainability of digital payments.

Proposed MDR Structure

The PCI has proposed a 0.3% MDR on UPI transactions exclusively for large merchants and a nominal fee on RuPay debit cards for all merchants. This proposal mirrors the existing MDR frameworks for other digital payment methods, such as credit cards and non-RuPay debit cards.

Government's Incentive Scheme

Recently, the government approved a Rs 1,500 crore incentive scheme to promote low-value BHIM-UPI transactions, particularly those made to merchants. However, the PCI highlights that this allocation barely covers a fraction of the estimated Rs 10,000 crore needed annually to maintain and expand UPI services.

The Importance of MDR

"MDR is the lifeline of the digital payments ecosystem," the PCI stated. Without it, the infrastructure's sustainability is at risk. Introducing a reasonable MDR for large merchant transactions would enable continued investment in innovation, cybersecurity, and merchant support, ensuring UPI's growth.

Current Merchant Landscape

India boasts six crore merchants accepting digital payments, with 90% classified as small merchants and approximately 50 lakh as large enterprises. The fintech and payments industry has long advocated for MDR on UPI transactions, arguing that a zero MDR regime is unsustainable.