Stories
UPI MDR Framework Needs Rationalisation To Protect Public Trust: Report
- •A report by IIT Bombay titled 'UPI at a Crossroads: Reintroducing the MDR' warns that the proposed merchant discount rate framework could undermine public trust in UPI if implemented in its current form.
- •The report suggests restricting MDR remuneration to merchants with an annual turnover exceeding Rs 50 crore, which would account for about 90 per cent of NPCI's proposed MDR.
- •It recommends imposing a reasonable charge on online e-commerce merchants while keeping everyday person-to-person payments and debt collection or loan EMI repayments free.
- •NPCI's recent circular outlines a 0.4 per cent MDR for P2M UPI payments above Rs 2,000, capped at Rs 300, aiming to create a sustainable revenue framework for digital payments.
Key Questions Answered
According to the NPCI circular, a 0.4 per cent Merchant Discount Rate will apply to person-to-merchant UPI payments above Rs 2,000, which is paid by merchants and capped at Rs 300 for transactions of Rs 75,000 or more. Everyday merchant payments and person-to-person transactions remain free.
The IIT Bombay report suggested that the proposed MDR framework should be rationalised and restricted to merchants with an annual turnover of over Rs 50 crore to protect public trust and financial inclusion.
The report recommended exempting debt collection and loan EMI repayments from MDR to support financial inclusion. Meanwhile, essential services attract a flat Rs 5 fee, and capital markets transactions have a lower 0.02 per cent rate for amounts above Rs 2,000.
