The Payments Council of India (PCI), representing 180 non-banking payment industry players, has urged Prime Minister Narendra Modi to reconsider the Zero Merchant Discount Rate (MDR) policy for Unified Payments Interface (UPI) and RuPay debit card transactions. The PCI’s formal letter highlights concerns over the financial sustainability of the digital payments ecosystem, which has been under stress since the Zero MDR policy came into effect in January 2020.
While acknowledging the government’s efforts in promoting digital payments and financial inclusion, the PCI noted that the financial incentives provided to offset operational costs — Rs 1,500 crore — cover only a fraction of the estimated Rs 10,000 crore required annually to maintain and expand UPI services. Sustaining India’s digital payments growth, the PCI emphasised, demands continued investment in innovation, cybersecurity, merchant onboarding, compliance, and IT infrastructure.
The demands
To address this challenge, the PCI proposes introducing MDR for RuPay debit cards for all merchants and a reasonable MDR of 0.3% for UPI transactions by large merchants. This aligns with the existing MDR structure for other digital payment modes, such as credit cards (around 2%) and non-RuPay debit cards (around 0.9%). The PCI assured that this change would not disrupt operations, as large merchants are already accustomed to MDR on other payment methods.
The PCI has sought the Prime Minister’s personal intervention and requested an opportunity to present its case in greater detail. The industry body reaffirmed its commitment to collaborating with the government and regulators to strengthen India’s digital payments ecosystem while ensuring long-term financial sustainability.
The letter highlights that India has around six crore merchants accepting digital payments, with 90% classified as small merchants by the Reserve Bank of India (RBI) — having an annual turnover of Rs 20 lakh or less. Approximately 50 lakh merchants fall under the large enterprise category. Enabling MDR for RuPay debit cards and UPI for large merchants would ensure sustainable monetisation for service providers without disrupting grassroots digital payment adoption.
MDR is described as the lifeline of the digital payments ecosystem. Without it, the sustainability of the infrastructure remains at risk. The PCI believes that a reasonable MDR for large merchant transactions would allow continued investment in critical areas like cybersecurity, grievance redressal, and merchant support, ensuring that UPI continues to thrive.
