Around three-fourths of India’s digital payment-accepting merchants will remain unaffected by the newly introduced merchant discount rate (MDR) on Unified Payments Interface (UPI) transactions above INR 2,000
MUMBAI — Around three-fourths of India’s digital payment-accepting merchants will remain unaffected by the newly introduced merchant discount rate (MDR) on Unified Payments Interface (UPI) transactions above INR 2,000, as they have never recorded a transaction exceeding that amount, National Payments Corporation of India (NPCI) Managing Director and Chief Executive Officer Dilip Asbe said on Thursday.
Speaking at the SBI Banking and Economic Conclave here, Asbe said India has more than 60 million merchants accepting digital payments, and nearly 75 per cent of them have not seen a single transaction above INR 2,000. As a result, the MDR policy will have no impact on the majority of merchants.
“We have about 60 million unique UPI merchants, and 75 per cet of them have not seen a transaction above INR 2,000. Therefore, the majority of merchants will not be impacted by the MDR,” he stated.
He explained that the bulk of the MDR burden will fall on larger businesses. According to Asbe, around 80 per cent of the total MDR value is expected to come from merchants generating more than INR 1,000 crore in annual gross merchandise value (GMV). Of the remaining amount, nearly half will come from businesses with annual GMV exceeding INR 1 crore.
Asbe noted that most of these merchants already accept credit card payments and are familiar with similar transaction charges. Therefore, the industry does not expect them to pass on the additional cost to customers.
"A significant portion of MDR is expected to come from large businesses, most of which already accept card payments and pay MDR," Asbe noted.
He, however, acknowledged that a small segment accounting for about 10 per cent of merchant value could potentially attempt to transfer the MDR burden to consumers.
Nevertheless, he said banks, payment aggregators, acquiring banks and NPCI would work to ensure that such charges are not passed on to customers.
“The real risk of a consumer getting charged is just 10 per cent of the overall value,” Asbe said. The NPCI chief also expressed confidence that the new MDR framework would not significantly affect UPI transaction volumes or values.