Govt to monitor if merchants are passing on UPI MDR to consumers, Pg17

Key Highlights:

• The Indian government will monitor daily if merchants pass on the Merchant Discount Rate (MDR) for UPI transactions exceeding Rs 2,000 to consumers, starting October 15.
• The National Payments Corporation of India (NPCI) announced a revised framework for MDR levy on person-to-merchant UPI transactions above Rs 2,000.
• The government rejected claims of introducing MDR due to US pressure, stating it promotes RuPay cards by keeping their transactions free of MDR.
• The United States Trade Representative (USTR) had previously expressed concerns regarding India's digital payment policies, including the 30% cap on third-party app transactions.

Detailed Insights:

• The MDR of 0.4% will apply only to person-to-merchant UPI transactions over Rs 2,000, not to individual-to-individual transfers.
• Government officials argue that fully subsidizing the fast-payment system would hinder innovation in the digital payments sector.
• The government is collaborating with payment aggregators to educate merchants on the new MDR charges.
• Officials expressed confidence that UPI transaction volumes will not significantly decline and cash usage will not increase post-implementation.
• India is consciously promoting RuPay debit cards by exempting all their transactions from MDR, regardless of the amount.
• The 30% cap on UPI transactions for third-party apps, aimed at fostering competition, has been repeatedly postponed, with the current deadline being December 2026.

Key Concepts Involved:

• UPI (Unified Payments Interface): An instant real-time payment system developed by NPCI facilitating inter-bank peer-to-peer and person-to-merchant transactions.
• Merchant Discount Rate (MDR): A fee paid by a merchant to their bank for accepting payments through digital channels, typically a percentage of the transaction value.
• National Payments Corporation of India (NPCI): An umbrella organization for operating retail payments and settlement systems in India, promoted by the Reserve Bank of India and Indian Banks' Association.
• RuPay: An Indian multinational financial services and payment network, conceived and launched by the NPCI.