From February, all businesses with turnover worth Rs 50 crore or above need to mandatorily provide certain electronic payment modes facilities like RuPay debit cad, BHIM-UPI (Unified Payments Interface), BHIM-UPI QR Code and UPI QR code or they could be fined Rs 5,000 per day. People making payments via these electronic modes will not need to pay any charge including MDR (Merchant Discount Rate) fee.
Union Finance Minister Nirmala Sitharaman, in a review meeting with chiefs of Public Sector Banks (PSBs), Indian Banks' Association and representatives of leading private sector banks, on December 28 had said that customers and merchants would no longer pay MDR (merchant discount rates) fee, a move that's aimed at providing a boost to online transactions. This is also an effort by the Centre to popularise RuPay Debit card and UPI platforms.
Finance Minister Nirmala Sitharaman, in her Budget speech last year, had proposed to insert a new section into the Income Tax Act (269SU), under which violators would have to pay a suitable penalty for not offering these payment options to customers.
Those with turnover worth Rs 50 crore or more can still accept payment via cash or other modes like debit or credit cards or e-wallets but they will have to give people an option to pay through the prescribed electronic mode.
MDR is the cost paid by a merchant to a bank for accepting payment from their customers via credit or debit cards every time a card is used for payments in their stores. The merchant discount rate is expressed in percentage of the transaction amount. The MDR is distributed among three stakeholders -- bank, PoS machine vendor and card companies -- and varies from 0-2 per cent on credit card transactions.
As per the government, the Reserve Bank of India or RBI and banks will absorb these costs from the savings that accrue to them on account of handling less cash as people move to digital modes of payments.
Though the latest decision will benefit customers, multinational electronic payments companies like Visa and Mastercard could face losses in the long run as more people will be influenced to make payment through cheap UPI platforms.
Edited by Manoj Sharma