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ARTICLE · 27 APRIL 2020

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"Zero MDR": What It Means And Why It Is Counterproductive To The Payments Industry

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The Government's rationale for the move was that MDR and other fees involved in digital payments increased costs for merchants, which disincentivized them from offering digital payment modes to their

IndiaFinance and Banking
Atulaa Krishnamurthy
Atulaa Krishnamurthy
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The Government of India has promoted Digital Payments over multiple initiatives in the past few years, one of which was an announcement in the Finance Minister's Budget Speech 2019, removing the Merchant Discount Rate ("MDR") charges applicable on payments made through the following electronic modes:

  • Debit Card powered by RuPay;
  • United Payments Interface (BHIM-UPI); and
  • Unified Payments Interface Quick Response Code (UPI QR Code).

The Government's rationale for the move was that MDR and other fees involved in digital payments increased costs for merchants, which disincentivized them from offering digital payment modes to their customers.

The removal of MDR charges was implemented by way of amendments to the Payment and Settlement Systems Act, 2007 and the Finance Act, 2019. These legislative changes are summarized below:

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