RBI Governor Sanjay Malhotra states discussions on reintroducing UPI MDR are 'premature' right now. This comes as the government proposes amending the PSSA, potentially allowing a 0.25-0.4% fee on transactions above ₹2,000. Brokerage Jefferies estimates this could generate ₹5,000-₹10,000 Cr revenue by FY28 for the ecosystem.
How We Got Here
UPI transactions were subject to MDR between April 2016 and January 1, 2020, before Section 10A of the PSSA made P2M transactions free. The payments industry has consistently advocated for MDR's return, citing unsustainable costs for banks and tech providers.
The Numbers
- The proposed amendment to the PSSA, 2007, would enable the Centre to directly notify which electronic payments are exempt from MDR.
- The 0.25-0.4% MDR would apply to business transactions (P2M) exceeding ₹2,000, with person-to-person (P2P) transactions remaining exempt.
- RBI Governor Malhotra noted that consumers ultimately bear transaction costs, whether directly or indirectly through the general economy.
- The Payments Council of India previously pushed for a 0.3% MDR on large-merchant UPI transactions.
- The Parliamentary Standing Committee on Finance has also recommended a phased reintroduction of UPI MDR.
What Happens Next
🇮🇳 Why This Matters for India
For payment providers and acquiring banks in Mumbai and Hyderabad, reintroducing MDR could finally make processing high-value P2M UPI transactions financially viable.
The Take
Malhotra's 'premature' comment feels like softening the ground, not stopping the inevitable. The MDR will come back for large P2M transactions, and while it's a win for banks and payment infrastructure companies, small merchants will ultimately bear the brunt.
Source:
Inc42 ↗