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MDR charges waived on UPI, RuPay transactions: FinMin

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To boost payments through home-grown real-time payment systems, Finance Minister Nirmala Sitharaman has announced the exemption of Merchant Discount Rate (MDR) charges on transactions done via UPI and RuPay payment modes.

Under the new rule which will come into effect from January 1, all companies with a turnover of 50 crore rupees or more will be mandated to provide the facility of payment through RuPay Debit card and UPI QR code to their customers.

The Department of Revenue (DoR) will soon notify RuPay and UPI as the prescribed mode of payment for digital transactions without any MDR and all the banks will also start a campaign to popularize RuPay Debit card and UPI, according to the announcement.

This decision, which has been taken after conducting meeting with Chiefs of Public Sector Banks (PSBs), Chief executive of Indian Banks’ Association and representatives of leading private sector banks, would facilitate the usage of low-cost digital payment modes such as BHIM, UPI, QR code, Aadhaar Pay as well as certain debit cards, NEFT or RTGS transactions.

For the uninitiated, MDR is the cost paid by a merchant to a bank for accepting payment from their customers via digital means. Currently, merchants bear the fee of MDR that is around Rs 12-15 per transaction.

This is not the first time when the government has decided to come up with no MDR charge system. On July 5 while presenting the Union Budget, Sitharaman had first proposed the abolition of MDR.

However, the move faced criticism from banks and payment firms. The Payment Council of India (PCI) was critical of the decision saying that the government proposal will lead to the whole digital payment industry without any business and revenue model.

Earlier, the payment industry stakeholders had cautioned that zero charges on digital transactions will hurt the payments firms and could affect acquiring new merchants. 

While MDR has finally been abolished amidst continuous criticism and heat from payment firms and several industry participants, it would be interesting to track how far this move will go in boosting digital payments across the country while providing early-stage payment service providers and startups a headspace to grow and develop a customer base.

During the meeting held in New Delhi, FinMin Sitharaman also launched a common e-auction platform to sell the attached assets of defaulters for the improved realization of value.

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