- 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.
- MDR is a fee charged from a merchant by a bank for accepting payments from customers through credit and debit cards in their establishments.
- 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.
- 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.
- 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.
- 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.
- The recent RBI Vision 2019-21 document has also recommended creating some additional efficiency wherever possible in costs and not eliminating the MDR.
- 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.
- 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.
3 min read