The industry estimates a loss of Rs 5,500 crore due to the Zero-MDR norm on UPI & RuPay debit card transactions

The industry estimates a loss of Rs 5,500 crore due to the Zero-MDR norm on UPI & RuPay debit card transactions

The Payments Council of India (PCI), the industry body for digital payments, yesterday said it has requested the finance ministry to roll back the Zero-Merchant Discount Rate (MDR) policy for Unified Payments Interface (UPI) and Rupay debit cards in the upcoming budget.

The policy which came into effect in January 2020 mandates that merchants should not be levied any charges on accepting payments though UPI and RuPay debit cards. MDR is a key source of revenue for the payments ecosystem.

PCI said the industry estimates a loss of Rs 5,500 crore from no revenue being earned on UPI and RuPay debit card transactions. To compensate for this, the body has sought an incentive of Rs 4,000 crore in its representations to the ministry.

With monthly transactions now having crossed the Rs 8 lakh crore mark, UPI has a share of over 50 per cent of Indian retail digital payments.

In an attempt to provide remuneration to banks and UPI apps, the government floated a Rs 1,300 scheme in December 2020 under which it will reimburse MDR for RuPay debit card transactions and UPI transactions up to Rs 2,000. But that does not seem to compensate for the huge estimated losses.

“There is still a huge gap to cover so that everyone in the payments value chain gets their credit. With Zero MDR, the government has taken away the ability of these payment service providers to invest in and maintain the financial infrastructure they have built,” the PCI said.

Zero MDR has long been a widely debated issue as the lack of an incentive is also seen as a hindrance in attracting more players to adopt these payment modes and invest more in the development of the tech infrastructure to handle the huge volumes of transactions.

Vishwas Patel, chairman, PCI, and director, Infibeam Avenues, said, “We request the government to consider a rollback of Zero MDR, with a view to broaden and significantly grow the merchant acceptance base particularly in the MSME space and to facilitate the deployment of payments infrastructure by non-bank players who have been the biggest deployers of capital in this area for the past few years.”

Furthermore, PCI has requested the government to remove UPI, UPI QR and RuPay from the ambit of rule 119AA of the Income Tax Act, which mandates that businesses with turnover of Rs 50 crore or above must accept payments through these modes.

PCI was formed under the aegis of Internet and Mobile Association of India in 2013 to cater to the needs of the digital payment industry and represents various players in the payments and settlement system.