The merchant discount rate (MDR) on digital payments is slowing down the deployment in India where the cost of merchant acquisition is around $500million to $1billion annually, as stated by the National Payments Corp of India’s (NPCI) Chief Executive Dilip Asbe in a panel discussion held on Wednesday.

Talking at the ongoing Global Fintech Festival, Asbe said, “In a broader level, the payment deployment ecosystem needs a 20-25 basis point incentive to acquire merchants, deploying devices and securing the systems.” He also said, “When the industry

understands the requirement of zero MDR, funds are required to deploy payment systems.”

The NPCI is presently on discussion with the Government of the possibility to bring back MDR.

Amitabh Kant, Niti Aayog CEO, said in the event that companies must tell the government how to solve the issue of zero MDR. He tells, “We, in the government, want to know the road ahead for the industry.”
Kant in a discussion with PhonePe CEO Sameer Nigam said, “If you tell us, we'll listen and take up the issue.”

MDR is the fee levied by banks to the merchants processing transactions on their systems. This fee was waived on transactions that were happening through NPCI’s RuPay and UPI modes by the government previous year to incentivize small merchants for adopting digital payment modes.

The Reserve Bank of India in the early part of the year said that the Payment Infrastructure Development Fund of INR 500 crore was sanctioned for supporting the sector, reeling under the loss of revenue, in deploying devices in the rural geographics.

Asbe said, “We are reviewing with the government on the possibility of bringing back MDR in an appropriate way. We have anyway allowed small merchant payments to be made through a P2P mode where there is zero MDR.”