Restore transaction fee on RuPay cards: Banks request finance ministry

Banks are reaching out to the government to introduce a merchant discount rate (MDR) on RuPay debit cards, The Economic Times (ET) reported. In order to fortify their payment network security and develop innovative payment solutions, the banks need additional funds and feel MDR could serve this purpose well, the report said.

MDR is a fee charged to a merchant for the payment processing of debit and credit card transactions. It is also referred to as the transaction discount rate (TDR). At present, there is no MDR for transactions done using RuPay debit cards.

A senior bank official said that the Indian Banks' Association (IBA) has written to the finance ministry requesting the restoration of MDR on RuPay debit cards, the report said.

"We have argued that MDR is essential and will foster sustainability and enable continued investments in cutting-edge technologies," a bank official told ET. He added that the investments made using this money will enhance the security infrastructure, enrich the user experience and strengthen the entire payments ecosystem. Moreover, the MDR will help develop a mechanism to provide dedicated support to merchants.

Previously, various stakeholders have highlighted their concerns about the potential negative consequences of the zero MDR regime. The ET report cited a government official who said that the zero MDR regime has implications for the growth of the digital payments ecosystem.

Under the PM Jan-Dhan Yojana, nearly 340 million RuPay cards have been issued so far. In a bid to push digital payments, the Centre is keen to subsidise low-value digital payments, the ET report said.