Over the last month, NPCI has slashed merchant discount rates (MDR) for merchant transactions using BHIM UPI and RuPay Debit Card to encourage adoption of digital payments, NPCI told MediaNama in an email.
1. NPCI slashed MDR for RuPay Debit Card transactions for merchant transactions across PoS, eCom, and BharatQR, to create a “cost-effective value proposition” for merchants to accept digital payments. This was announced on September 13.
- MDR was revised to 0.60% for transactions above Rs 2,000 with a maximum cap of Rs 150 per transaction. This is currently capped at 0.90% for transactions above Rs. 2,000, with a higher cap of Rs 1,000 per transaction.
- MDR for card-based transactions via Bharat QR has been reduced to 0.50% with a maximum cap of Rs 150 per transaction.
- The revised rates will become effective October 20, 2019.
2. NPCI reduced MDR for BHIM UPI merchant transactions to “promote digital payments” and to encourage merchants of all categories to use BHIM UPI, this was announced on August 30.
- MDR for UPI merchant transactions was revised to 0.30% with a maximum cap of Rs. 100 per transaction. Currently, this is capped at 0.25% for transactions up to Rs 2,000 and at 0.65% for transactions above Rs 2,000.
- Offline merchant transactions done via QR Scan and Pay will pay no MDR for transactions up to Rs 100.
- The revised rates will become effective October 1, 2019.
Govt proposed zero MDR to encourage digital payments
In the Union Budget 2019, the government had proposed that businesses with annual turnover of more than Rs 50 crore hat offer digital modes of payment to their customers get MDR (Merchant Discount Rate) waiver. Instead, RBI and banks would absorb these costs savings accrued from cashless transactions. The government had said that necessary amendments were being made to the Income Tax Act and the Payments and Settlements Act, 2007 to give effect to this.
The Payments Council of India (PCI), which includes MasterCard, Visa, Paytm, PayU, RazorPay among others as members, had said on July 9:
- Levying zero MDR on merchants would eventually lead to the collapse of the payments acquiring industry.
- MDR, if not if not charged to the customers and merchants, should be borne by the government.
PCI also said that none of the recent reports on digital payments, including the one by an RBI-appointed committee headed by Nandan Nilekani and the 2017 Watal Committee report, had recommended zero MDR. It also referenced the recent RBI Vision 2019-21 document, which recommends creating additional efficiencies in costs and not eliminating MDR.