MDR on UPI and RuPay Debit Cards: Proposal for Large Merchants
Why in the news
The banking industry has asked the Union government to restore merchant fees on UPI and RuPay debit card payments, but only for bigger businesses.
Key facts
- MDR (Merchant Discount Rate) is what a merchant pays a bank for handling a digital payment.
- These payments currently carry zero MDR; banks and the government bear infrastructure costs.
- The proposal is under consideration.
Why bring MDR back
- Banks process real-time payments without revenue; MDR could fund infrastructure and innovation.
- Visa and Mastercard already charge MDR.
- Small businesses and MSMEs stay exempt, so adoption is not hurt.
Likely impact
| Group | Possible effect |
|---|---|
| Large merchants | May raise prices or discourage UPI in favour of cash |
| Merchants and consumers | Pushback, as UPI grew on zero cost |
| Banks and providers | More revenue to improve UPI services and security |
Open questions
- The rate is unofficial; exemptions for sectors like government services may come.
- A phased rollout or government incentives could soften the impact.
Exam angle
- Current MDR on UPI and RuPay debit: zero.
- Turnover threshold: ₹40 lakh (GST-based).