In a bid to promote digital payments, Government of India (Ministry of Electronics and Information Technology), had issued a notification in December 2017, stating that Merchant Discount Rates (MDRs) would be reimbursed by the Government on transactions up to Rs. 2,000. This was applicable on all transaction below Rs. 2,000 made through debit cards, BHIM UPI or Aadhaar enabled payments systems. Payments Council of India (PCI), the representative body of non-banking merchant aggregators and acquirers have raised serious concerns over non-receipt of reimbursements of MDR by merchant aggregators, from the related acquiring banks since January 2018.
In addition, there is still ambiguity on the extent of MDR reimbursements that will be passed on to the aggregators and the industry fears that banks will only pass on a small proportion of the reimbursements to merchant aggregators and acquirers, while retaining the bulk of it with themselves. This is likely to seriously impact the operating ability of merchant aggregators and dent the efforts to promote digital payments.
A notification issued by MeitY stated that – In the digital payments ecosystem, merchants play a very crucial role especially in a country like India where nearly 90% of merchants are from the unorganized sector in the form of small grocery stores, local outlets, etc. Considering RBI and NPCI transaction data for debit cards, UPI, BHIM and AEPS from January to June 2018, over 3000 million transactions are processed with value of more than Rs. 4500 billion.
PCI members believe that post demonetization role of merchant aggregators has been crucial in spreading digitization of payments across the country. The entire Payments Industry supported the movement with full participation.
Vishwas Patel, Chairman of Payments Council of India says, “The prevailing ambiguity over MDR reimbursements, is leading the same industry which supported Digital India, to tremendous pressure. As far as I am aware, none of the banks have reimbursed for debit card / UPI / AEPS transactions processed from 1st January 2018 till date. Also, major Public Sector banks like State Bank of India have announced that they will not reimburse for Off Us transactions of Debit Cards for transaction amounts below Rs. 1000, though MeitY has said that they will be reimbursing the bank upto 0.40% of transaction amount to banks. This will kill micro transactions as it will make processing below Rs. 1,000 totally unviable for our non-banking merchant aggregators and acquirer members. Over all, MDR reimbursement taking such a long time and fear of not getting sufficient share from banks is a major concern area right now for all our members.”
