The National Payments Corporation of India (NPCI) has rationalised BHIM UPI MDR (Merchant Discount Rate) for merchant transactions with an aim to giving the much-needed push to digital payments in the country. To drive digital payments in both small and large merchant transactions, there is big shift in the MDR for UPI merchant transactions. MDR for large ticket transactions has been capped at a maximum Rs. 100 and kept at Zero for offline merchants for transaction up to Rs. 100.
Every time a customer uses his debit or credit card for making payments, the merchant incurs a fee which they have to give to the bank providing the debit or credit card. Usually the MDR is in a certain percentage of the transaction amount. It is a transaction cost charged by the bank and paid by the merchant. The customer does not have to bear it.
From January 1, 2018 onwards, the Reserve Bank of India changed MDR charges for debit card transactions. "Taking into account the twin objectives of promoting debit card acceptance by a wider set of merchants, especially small merchants, and ensuring sustainability of the business for the entities involved, it has been decided to rationalise the MDR for debit cards," the central bank had said back then. For merchants with over Rs. 20 lakh turnover, the MDR was fixed at 0.4 per cent if the transaction was done through point of sale machines. For these merchants the MDR was further reduced to 0.3 per cent if the transaction was done through QR Code.
As per the latest notification, MDR has been revised to 0.30 per cent with a maximum cap of Rs.100 per transaction. Presently, this is capped at 0.25 per cent for transactions up to Rs. 2,000 and at 0.65 per cent for transactions above Rs. 2,000. This means for transaction up to Rs. 2,000 you have to pay Rs. five and for transaction of Rs. 2,001 you have to pay Rs. 13 as MDR charges. Further, MDR for offline merchant where transactions are done through QR Scan and Pay will be Zero for transaction up to Rs. 100. The new MDR rates will come into effect from October 1, 2019.
NPCI has been taking various steps for proliferation of merchant payments using UPI. NPCI has already introduced a new merchant category of P2PM category for small merchants wherein inward transactions up to Rs 50,000 per month is allowed. This limit is now extended to Rs. 100,000 per month and with instructions for real-time credit to merchant’s own account.
Dilip Asbe, MD & CEO, NPCI said “The Zero MDR for transaction up to Rs 100 and increased limit for P2PM category or small merchants will help faster migration from cash to digital using BHIM UPI. The lower MDR will encourage all categories and types of merchants to deploy the asset-lite acceptance infrastructure (BHIM UPI QR code) to grow digital footprint across the country. We envisage this reduction in MDR will encourage merchants to start accepting BHIM UPI and grow the volume on merchant transactions multi-fold.”