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Industry-govt talks over MDR may restart

Jul 27, 2019 by The Passage Team
Industry-govt talks over MDR may restart

Digital payments companies in India are worried about the zero merchant discount rate (MDR) proposed in the budget earlier this month. As finance secretary Subhash Chandra Garg makes his exit, industry sources told Economic Times that discussions with the government may need to be kickstarted again.

A top executive of the payments industry told ET that a meeting was scheduled with the economic affairs secretary in the first week of August; now that there will be a new person in that position, the industry will have to explain its position on the MDR issue again. The Indian Banks’ Association had also sent a letter earlier.

MDR is the rate merchants pay to banks and service providers for the digital payments facilities they enjoy. A senior banker with a private sector lender said the zero MDR move will be a major dampener since banks are not going to absorb the cost of deploying payment terminals.

The Finance Bill says that no bank or system provider shall charge anyone directly or indirectly for using electronic payment modes, but the modes of such payment have not been clarified.

The payment executive quoted above told ET, “While the minister in her budget speech mentioned certain debit cards, what exactly is included in this list is not clear yet, is it only RuPay debit cards or all debit cards is the big question.”

Some in the industry are of the view that if only Rupay debit cards attract zero MDR, banks will simply turn to Visa and Mastercard since they will make some money per transaction. Others say that the government could soon clarify that zero MDR applies only to smartphone or Aadhaar-based payments, which are asset-light in comparison.

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