Post Nirmala Sitharaman’s decision of no MDR on RuPay & UPI, Payments Council warns it will kill industry

No MDR charges on transactions through RuPay cards and UPI payments will kill the digital payments industry, the Payments Council of India stated on Monday while criticising the government’s move. After a meeting with bankers last Saturday, Finance Minister Nirmala Sitharaman had asked them not to charge MDR on payments via RuPay, UPI from January 1 with a view to driving digital payments. The move will apply to all companies with a turnover of Rs 50 crore or more. Merchant Discount Rate is the fee paid by a merchant to a bank for accepting digital payments. The move is part of the budget announcement in July.

Describing the decision as surprising and will stop investment and innovation, Vishwas Patel, the Payments Council of India Chairman, said, “the zero MDR on RuPay and UPI will kill the industry and make the business model unviable. It’s like nationalisation of the payments industry. If the government wants to drive digitization, then it should bear the cost.” Stating that there will be significant negative impact on the payment ecosystem — innovation, job losses and a slowdown in the expansion of the digital payments, he said the move will lead to end of customer incentive spends by participants.

Digital payments had reached 13 per cent during the demonetisation months but has since declined to around 11 per cent now, indicating rising cash in circulation, he said. “It is also irrational to pass on the benefits to large retail merchants for transactions above Rs 2,000,” he said, adding the move will deflate the hard work done by the acquiring industry and that if MDR is not to be charged to merchants, it should be borne by the government.

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