Payments body PCI urges PMO to levy MDR on UPI, RuPay debit cards

If the proposal is accepted, nearly 90 per cent of India's 60 million UPI-accepting merchants will remain unaffected, as they fall under the small enterprise category

The Payments Council of India (PCI) -- a representative body of digital payments players in India --has shot off a letter to Prime Minister Narendra Modi demanding introduction of a 0.30 per cent merchant discount rate (MDR) regime on transactions made through Unified Payments Interface (UPI) at large merchants.

 

The PCI has also sought to introduce an MDR structure on RuPay debit card transactions applicable to merchants of all sizes.

 

MDR refers to a fee that merchants pay banks or companies processing payments for executing a transaction.

 

If the proposal goes through, nearly 90 per cent of India’s 60 million UPI-accepting merchants will remain unaffected, as they fall under the small enterprise category. Small merchants are those enterprises with an annual turnover of ₹20 lakh or less.

 

Only about five million earning over Rs 20 lakhs, categorised as large merchants as per the payments body, would be liable to pay a nominal fee for processing transactions on India’s real-time payments system UPI.  

 

“With the MDR, there will be more money in the system. The acquiring base will expand since the next 300 million UPI users are difficult to acquire given challenges around languages, among others,” Vishwas Patel, Chairman, PCI told Business Standard.

 

He added that large merchants would be comfortable with a nominal MDR on UPI transactions since these enterprises are used to paying a fee in the range of 1 to 2 per cent on payment instruments such as debit and credit cards. 

 

“The introduction of a reasonable MDR for large merchant transactions will allow the industry to continue investing in innovation, cybersecurity, grievance redressal, and merchant support, ultimately ensuring that UPI continues to thrive,” the PCI said in a statement.

 

The letter to the PMO comes on the back of the government approving ₹1,500 crore in a scheme for the promotion of low-value BHIM-UPI transactions when made from peers to merchants for financial year 2025 (FY25).

 

This was a substantial cut from the ₹3,268 crore approved in 2023-24 (FY24).

 

PCI added that the allocation amounting to ₹1,500 crore covered only a fraction of an estimated ‘₹ 10,000 crore annual cost required to maintain and expand UPI services’.