India is one of the biggest markets for the digital payments industry. The growing economy powered by increased access to internet services and high-tech smartphones has delivered a solid push to the whole fintech-centered digital payments revolution. But, MDR seems to be proving a hurdle in this journey for not just banks but also merchants who provide digital transaction option during check-outs and refunds.

The payments industry, which holds a lion’s share in the Indian Fintech space, has urged the Union Government of India to consider a rollback of ZERO MDR in the upcoming Union Budget. As per speculations floating in the fintech market, the payments industry in India seeks a rollback on Zero MDR, hoping this would help broaden and significantly grow the merchant acceptance base, particularly in the MSME space.

India’s central ministry for finance will present the Union Budget on 1 February 2022, a day after the Parliament commences its Union Budget session. Many pertinent issues arising from the fintech industry such as cryptocurrencies, digital payments, wallets, BNPL policies and KYC, taxation, and MDR charges are speculated to take a major chunk of business hours this year.

The Payments Council of India [PCI], the largest industry body for the digital payments ecosystem in the country, says that the digital payment industry wishes for the rollback of the Zero MDR regime for UPI and Rupay debit cards in the country in this budget 2022.

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Why the Payments Industry Seeks Rollback of ZERO MDR?

The driving force behind rollback requests can be summed up in the following points mentioned below:

• The Central Government and RBI have played a catalytic role in the development and growth of digital payments in the country, thereby progressing towards achieving the goal of a “less-cash society”.
• The industry appreciates the incentive of Rs 1,300 crore to be reimbursed to banks which is another step in the direction to achieve the Government’s Goal of Digital India and will help the industry sustain.
• The industry expects a loss of Rs 5,500 crore from UPI and RuPay MDR being Zero.
• There is still a huge gap to cover so that everyone in the payments value chain gets their credit.
• With Zero MDR, the government has taken away the ability of these Payment Service Providers (PSPs) to invest in and maintain the financial infrastructure they have built.

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What’s PCI’s role in Zero MDR Rollback Initiative?

Payments Council of India was formed under the aegis of IAMAI in the year 2013 catering to the needs of the digital payment industry. The Council represents various players in the payments and settlement system to address and help resolve various industry-level issues and barriers which require discussion and action.

Last month, The Reserve Bank of India (RBI) decided to float a discussion paper on MDR charges, which greatly impacted the country’s digital payments industry.

Will Incentivization Work for the FinTech Industry in 2022

PCI in its request to the Ministry of Finance has requested for a rollback of the Zero MDR regime for UPI and RuPay debit or to incentivize the industry with an amount of Rs 4,000 crore to bridge this gap. The payments industry hopes to have some relief which can then be used by them to further expand the digital payments infrastructure of the country and work on some new innovative initiatives to further the digital financial inclusion in the country, says PCI.

On this submission, Vishwas Patel, Chairman, Payments Council of India and Director, Infibeam Avenues, says, “We request the government to consider a rollback of the Zero MDR, with a view to broaden and significantly grow the merchant acceptance base particularly in the MSME space and also to facilitate the deployment of payments infrastructure by non-bank players who have been the biggest deployers of capital in this area for the past few years”

Furthermore, PCI suggests deleting Section 10A from the PSS act and to remove UPI, UPIQR and RuPay from the ambit of rule 119AA of the Income Tax Act, for the development of the digital payments sector.

These suggestions have been made keeping in mind the interests of digital payments services, creation of sustainable models and job creation in the digital payment ecosystem, empowerment of consumers through the digital ecosystem and driving investments in the Indian digital ecosystem. PCI expresses optimism that the Government will take into consideration the criticality of the matter and provide relief to the sector.

PCI works with all its members to promote payments industry growth and to support our national goal of ‘Cash to Less Cash Society’ and ‘Growth of Financial Inclusion’ which is also the Vision Shared by the RBI and Government of India. PCI works closely with the regulators i.e. Reserve Bank of India (RBI), Finance Ministry, and any similar government, departments, bodies or Institutions to make ‘India a less cash society’.

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