What is Merchant Discount Rate (MDR)?

Question

Asked: October 12, 20212021-10-12T17:58:57+05:30 2021-10-12T17:58:57+05:30In: Economics

What is Potholes on the digital payment superhighway?

[Deleted User] · Answer 1 · 2021-10-12T18:03:05+05:30

Context:

In Budget 2020-21, the government prescribed zero Merchant Discount Rate (MDR) for RuPay and UPI, both NPCI products, to popularise digital payments.

MDR is the rate charged to a merchant for payment processing services on debit, credit card or UPI transactions.
It is the cost which is paid to banks and payment service providers (PSPs), during a transaction.
MDR is the only source of revenue for the (UPI) ecosystem.

National Payments Corporation of India (NPCI) is an umbrella organisation for operating retail payments and settlement systems in India.
It is an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, for creating a robust Payment & Settlement Infrastructure in India.
NPCI has been incorporated as a “Not for Profi t” Company under the provisions of Section 25 of Companies Act 1956 (now Section 8 of Companies Act 2013), with an intention to provide infrastructure to the entire Banking system in India for physical as well as electronic payment and settlement systems.
Some of the payment services of NPCI are as follows- NFS, IMPS, AePS, CTS, RuPay, UPI, Bharat BillPay, NETC, BHIM, BharatQR, BHIM Aadhaar Pay.