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Banks association asks NPCI to scrap MDR on UPI, RuPay card transactions

Finance Minister Nirmala Sitharaman had said in the last Budget that no charge would be levied on UPI and Rupay transactions

Doing away with charge levied on merchants may hurt PoS machines deployment
Neha Alawadhi New Delhi
2 min read Last Updated : Jan 24 2020 | 2:01 PM IST
The Indian Banks’ Association has written to the National Payments Council of India (NPCI), which enables digital payments and settlements in India, to ask for retrospective application of zero merchant discount rate for Rupay card and Unified Payments Interface (UPI) transactions.

Finance Minister Nirmala Sitharaman had said in the last Budget that no charge would be levied on UPI and Rupay transactions.

MDR is the fees a merchant pays to a bank for accepting payment from their customers via cards or UPI. Firms like Google Pay and PhonePe have spent a lot in building UPI infrastructure, and will likely be most impacted if the association’s suggestion is accepted.

Firms like Paytm, Cred, Sachin Bansal's Navi Technologies will not be impacted, as they are financial services companies and not only UPI payment providers.

The industry has come out against the proposal for zero MDR several times in the last year saying it will impact payment providers who will have no incentive to invest in building infrastructure.

“The matter of implementation of GoI mandate with respect to zero MDR was placed before IBA managing committee in its meeting dated 17/1/2020. IBA Managing Committee has decided that with respect to Zero MDR on Rupay Card and UPI transactions. Zero Interchange is acceptable to banking industry and NPCI should be requested to consider Zero Interchange, Zero switching fee, and Zero fee for PSPs while implementing GoI mandate," IBA has said in its letter to NPCI.

Google and PhonePe did not respond to a request for comment.

The Nandan Nilekani committee, formed by the central bank, and the Watal committee of Niti Ayog have called for market-driven pricing earlier.

Topics :Nirmala SitharamanNPCIUPIRuPay