Payment service providers fear shutdown,ask govt to pay MDR

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  1. Payment Council of India(PCI) has said that the budget proposal to remove the merchant discount rate(MDR) will lead to the collapse of the payment acquiring industry.
  2. MDR is a fee charged from a merchant by a bank for accepting payments from customers through credit and debit cards in their establishments.
  3. Currently,there is a provision to get a merchant discount rate of up to two percent on every digital transaction which helps the intermediaries recover the cost of setting up the infrastructure.
  4. However,the budget has proposed that zero MDR will be applicable to businesses with a turnover of ₹50 crore that facilitate low-cost digital payment modes such as BHIM, UPI,QR code among others.
  5. Further,experts have said that this proposal will affect non-bank payment service providers(PSPs) like aggregators/ processors who will be forced to shut down if there is no commercial model.
  6. Payment providers have also said that multiple digital payments reports over decades have also never recommended zero MDR.They have said various reports have recommended market-based pricing with support and focus to drive merchant acquiring. 
  7. The recent RBI Vision 2019-21 document has also recommended creating some additional efficiency wherever possible in costs and not eliminating the MDR.
  8. The Payments Council of India(PCI) was formed under the aegis of Internet and Mobile Association of India(IAMAI) in the year 2013 catering to the needs of the digital payment industry.
  9. The Council was formed for the purposes of representing the various regulated non-banking payment industry players,to address and help resolve various industry level issues and barriers which require discussion and action.
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