Govt to Monitor Merchant Discount Rate Passes to Consumers

The Indian government is in talks with payment aggregators and platforms to ensure that merchant discount rate (MDR) on transactions is not passed onto consumers. Finance ministry authorities told reporters Thursday.

The Centre asserted that it does not expect a decline in UPI transactions or increased use of cash following its decision to charge a 0.4% merchant fee on transactions above Rs 2,000.

On Tuesday, the finance ministry said that banks have been advised to ensure merchants do not pass MDR to customers. "From Oct 15, we will monitor on a daily basis whether merchants are passing the MDR to consumers," the, officials said., but did not elaborate on the steps to ensure consumers are not burdened.

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Authorities also pointed out that there will be no GST burden on merchants after MDR kicks in as the tax will be offset through input tax credit.

Countering Congress’ charges that MDR has been introduced under US pressure to aid large platforms. Department of financial services took to social media and maintained that the move was meant to enable more domestic players to operate.

It shared govt had a clear policy to only allow RuPay credit cards on UPI to enable it to become the preferred choice for Indian users.

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"Any foreign company operating in India would like their product to be as competitive as local ones. But if govt has kept RuPay debit cards free of MDR, how can anyone think we are acting under foreign pressure? Introducing MDR enables new players to enter and lets existing small players compete," an official said.

They stated that fully subsidizing the fast-payment system won’t ensure innovation in the sector. “As a sovereign nation, if we want to have our own institutions, some transactions have to bear the cost,” the official said.

Authorities further added a dedicated fund will be set up with a contribution of 5% of the MDR collections for promoting and accelerating usage of UPI by small merchants and encouraging its sustained usage.