Payment gateway firms struggle to recover Rs 600 cr MDR subsidies from Govt

A subsidised scheme started by the government to make digital payments easier, has now become pain points for payment firms and banks due to delay in reimbursement.

Merchant Discount Rate (MDR) subsidy, that was issued by govt last year in December, to waive off all transactions fee from digital transaction up to Rs 2000 and reimburse banks, is still due.

The scheme started in January 2018 and no payment has been made to payment aggregators such as BillDesk, PayU and CCAvenue, who in turn perform a crucial task for banks, according to Business-Standard report.

These firms reported having 20 basis points (on an average) for each transaction through debit cards until December 31, 2017. Later, RBI capped the MDR to 0.4 per cent of the transaction value for transactions up to Rs 2000.

The govt has to pay the above mentioned per cent to banks instead of merchants. Here, banks will be responsible to pay all parties.

Digital transactions touch 1.06 Bn mark, values surpass Rs 125 trillion in December

Due to non-payment of MDR subsidy, payment firms are struggling to keep afloat as it is their major source of revenue. This is also affecting their operations. In last five months, around Rs 2500 billion of debit card transactions took place. According to an estimate, the total amount that govt has to give away is Rs 5-6 billion.

A bank also approached the ministry thrice for the release of money but the govt plans to verify the transactions before making payments. An Axis bank spokesperson said that they have submitted invoices but are yet to get payments.

However, SBI claimed to have received payments, but it is yet to distribute the payment to its partners.

In a time when the government is pushing for digital India and digital transactions, delay in reimbursement of subsidy does not go well with their digital movement. The delay reinforces the same old belief 'no time-bound work' when it comes to government projects.