It has been reported that the Central Government is considering a plan to bring back merchant charges for UPI-based transactions and RuPay debit card transactions.
Merchant Discount Rate (MDR) This fee is paid by the merchant to the bank for making real-time payments. Meanwhile, MDR fees are not currently charged for UPI-based transactions and RuPay debit card transactions. To promote digital transactions, the Central Government announced the withdrawal of MDR fees in the Budget for the financial year 2021-22. Till then, merchants were paying less than 1 percent of the transaction amount to banks as MDR fees. Following the Budget announcement, the Central Government is providing subsidies to banks and fintech companies to enable these payments at a cheaper rate. However, this subsidy is not enough for banks and fintech companies to cover the infrastructure cost required to process these transactions.

Also, this year’s central budget has allocated only Rs 437 crore for payment subsidy. In the previous year, more than Rs 3,500 crore was allocated for payment subsidy. Now that UPI has become the retail payment method and RuPay has become popular, banks are thinking of stopping the complete discount. Banks have sent an application to the central government to bring back MTR charges on UPI transactions for large businesses. In the proposal sent by the banks, MTR charges may be re-imposed on merchants with an annual turnover of more than Rs 40 lakh based on GST.

Depending on the size of the business, the government may set a tiered pricing for UPI so that large merchants pay a higher fee and small merchants pay a lower fee. UPI may continue to be provided free of charge to merchants with an annual turnover of less than Rs 40 lakh. A banker said, “Our argument is that if big merchants with card machines are charging MTR for other payment instruments like Visa and MasterCard debit cards and all types of credit cards, then why can’t they charge for UPI and RuPay debit cards?” He questioned. So, it is expected that MTR will be levied again on UPI-based transactions and RuPay debit card transactions soon.