Finance Minister Nirmala Sitharaman has announced a couple of new regulations in the finance sector, which aims its best to strengthen the digital payment system, hence working towards achieving a ‘less-cash’ economy.
The Finance minister held a meeting with heads of different public sector banks,
along with the Finance secretary, revenue secretary, economic affairs secretary, electronics and information technology secretary, CBI Director, RBI representative and the chief executive officer of NPCI, in New Delhi on Saturday.
along with the Finance secretary, revenue secretary, economic affairs secretary, electronics and information technology secretary, CBI Director, RBI representative and the chief executive officer of NPCI, in New Delhi on Saturday.
In this meeting, the officials along with the FM discussed various issues, post which Sitharaman announced various steps including strengthening of the digital payment system and a common e-auction platform for banks.
Exemption of MDR Charges :-
In a move towards achieving a less-cash economy, Sitharaman announced the exemption of Merchant Discount Rate(MDR) charges on the transactions done via UPI and RuPay modes, on Saturday.
According to this, any company with a turnover of Rs 50 crore or more shall mandatorily have to provide the facility of payment through RuPay Debit card and UPI QR code to their customers. As a result, such digital transactions made using RuPay credit cards, or UPI QR codes will not face additional charges for merchants or customers, starting next year.
The Department of Revenue will soon notify RuPay and UPI as the prescribed mode of payment for digital transactions without any Merchant Discount Rate (MDR). Also, the government will further urge the banks to promote RuPay cards as prescribe mode of payment.
What is MDR and How can it Affect You and Merchants?
The Merchant Discount Rate is basically the fees that a merchant pays to the bank, when a customer swipes a card on the merchant’s point-of-sale (PoS) terminal. This cost is often passed on to the customer. The MDR charge is distributed among three stakeholders—the bank that enables the transaction, the vendor that installs the PoS machine and the card network provider such as Visa or MasterCard.
By deciding to choose RuPay and UPI as the platforms that shall not attract this levy, may promote these home-grown digital payment pathways over those promoted by foreign companies, including VISA and MasterCard.
The move comes in the wake of finance minister’s budget speech of 2019-20 in July, when she said that the businesses with an annual turnover of Rs 50 crore or more shall offer affordable digital modes of payment to the consumers.
She listed “BHIM UPI, UPI-QR Code, Aadhaar Pay, certain Debit cards, NEFT, RTGS” and more as the low-cost digital modes of payment which could be offered without the imposition of MDR in order to promote a “less cash” economy.
