New Delhi: The government is considering re-introducing merchant discount rates (MDR) on RuPay debit card and UPI transactions for large businesses. Currently, small merchants are exempt, but those with an annual turnover exceeding ₹40 lakh may have to pay this fee. Fintech companies argue that large businesses can easily absorb this charge, benefiting their operations as well.
Banking Industry's Proposal
According to an Economic Times report, the banking industry has submitted a proposal to the government. It suggests that while small merchants should remain exempt from MDR, larger businesses should be charged.
What is MDR?
Merchant Discount Rate (MDR) is the fee a merchant pays for digital payments. Currently, no MDR is levied on UPI and RuPay debit card transactions. However, the government is now preparing to impose a fee on these transactions.
Fintech Companies' Demand
Fintech companies advocate for the reintroduction of MDR. They contend that large merchants can easily afford this small fee. The cost of payment processing has increased due to new regulations, and the government subsidy is insufficient. In 2022, when MDR was removed, the fee charged was less than 1% of the transaction value. Now, the government subsidy has been reduced from ₹3,500 crore to ₹437 crore.
Impact on Customers?
Generally, the MDR fee is borne by the merchant, not the customer. However, many merchants may recoup this cost by increasing the prices of goods or services. Some merchants might also illegally demand an extra charge for digital payments.
Dislinking Inactive Mobile Numbers from UPI ID Will Be Difficult
If your UPI ID is linked to an inactive mobile number, dislinking it will not be easy. However, in the future, inactive mobile numbers will be removable from UPI IDs.
NPCI has instructed banks and Payment Service Providers (PSPs) to update their databases by March 31, 2025. The aim is to prevent potential fraud associated with discontinued mobile numbers.
Inactive Numbers Can Increase Fraud
According to Telecom Department (DoT) regulations, a mobile number unused for 90 days is deactivated and can be assigned to a new customer. However, the bank and UPI ID retain the old user's information, increasing the risk of fraud. NPCI has instructed banks to update their mobile number databases weekly to remove recycled numbers.
Will the Government Implement the New MDR?
The government has not yet made a final decision, but if implemented, large businesses will have to pay extra charges for digital payments. This could impact the future of digital transactions.
