'Further cut in card payment charges will stifle industry'

In the backdrop of Reserve Bank of India (RBI) issuing a circular aimed at rationalising Merchant Discount Rate (MDR) on debit card transactions, Payments Council of India (PCI) on Thursday said that the move will stifle the industry.

The PCI is the representative body of non-banking merchant aggregators and acquirers.

"The government move to reduce the MDR further will stifle the industry," it said here in a statement.

"The interchange is heavily favoured towards the card issuing banks, thereby not leaving any margins for acquirers and payment processors. We hope RBI will ensure that there is equitable distribution of MDR among all players in the ecosystem," Vishwas Patel, Vice Chairman of PCI, said.

Currently, MDR charges on debit card transactions stand at below 0.75 per cent for transactions less than Rs 2,000 and less than one per cent for transactions above Rs 2,000.

According to the report of a committee chaired by former Finance Sercretary Ratan Watal, formed for restructuring the payments framework in India, states' transition to digital payments is estimated to bring about a significant reduction in the costs incurred on account of inefficiencies associated with cash and other paper-based payments.

"The MDR should be left to be decided by the market forces for sustainable growth. The current MDR is already at a very low level and any further reduction of MDR will discourage future investment in the industry and potentially impact the growth of digital payments industry in India," PCI said.

In its draft circular, the RBI recently said that demonetisation has led to smaller merchants taking the first step towards acceptance of digital payments, but the momentum of digital payments acceptance needs to be maintained.

--IANS

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