RuPay Debit Card / Making payments will now be expensive! Know how much extra charge you will have to pay?

RuPay Debit Card: People's inclination towards digital transactions is increasing rapidly in India. Especially the use of UPI and RuPay debit cards is seeing tremendous growth. Due to various steps taken by the government to promote Digital India and the increasing digital awareness of the people, a large number of people in the country are preferring cashless transactions.

Role of digital transactions and MDR

Currently, there is no fee (MDR - Merchant Discount Rate) on transactions made through UPI and RuPay debit cards. MDR is the charge that shopkeepers pay to their bank for processing digital payments. Currently, the government has waived this fee, which has promoted digital transactions. But now the government is considering implementing it again.

Will MDR be imposed on big traders?

According to media reports, the banking industry has sent a proposal to the government, suggesting that MDR be imposed on shopkeepers whose annual turnover is more than Rs 40 lakh. The government is considering this proposal and may possibly implement a tier system, whereby large merchants will be charged more and small merchants will be charged less or no fee.

Why the need to bring back MDR?

Banks and payment companies argue that when large merchants are already paying MDR on Visa, Mastercard and credit cards, why was it abolished for UPI and RuPay? It was abolished by the government in 2022 to encourage digital payments. But now, banks and payment companies are demanding to re-implement it, as they need financial resources to maintain the infrastructure of UPI and RuPay.

What is MDR and its importance?

MDR (Merchant Discount Rate) is the fee that shopkeepers pay to the bank in exchange for the facility of accepting real-time payments. When a customer makes a payment through UPI or debit card, banks and payment companies have to spend money to maintain its infrastructure. MDR is charged to compensate for this expense.

Possible effects of restoration of MDR

Economic burden on big merchants: Big merchants will have to pay additional fees, which may increase their costs.

Possible decline in digital transactions: If small merchants discourage digital payments to avoid this fee, the growth rate of digital transactions may slow down.

Benefit to banks and payment companies: The withdrawal of MDR will increase the income of banks and payment companies, which will enable them to further strengthen their digital infrastructure.

Conclusion

The possible withdrawal of MDR can be an important policy change amid the growing trend of digital transactions in India. The government will have to ensure that this move does not discourage digital payments and a viable solution is found for small merchants. To strengthen Digital India, there is a need to adopt a balanced policy so that the interests of customers, merchants and financial institutions are protected equally.