Finance Ministry to Ease out RuPay Transactions

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Digital transactions made using RuPay credit cards, or UPI QR codes will not face additional charges for merchants or customers from the beginning of next year, Finance Minister Nirmala Sitharaman said on Saturday. All shops, business establishments and companies with an annual turnover of ₹50 crore or more have been mandated to offer these modes of payment to customers.

The Department of Revenue will soon notify RuPay and UPI as the prescribed mode of payment for digital transactions without any Merchant Discount Rate (MDR), Ms. Sitharaman said after a meeting with public sector bankers, adding that the notification would come into effect from January 1, 2020.

The Merchant Discount Rate is the percentage of the digital transaction that a merchant pays to banks. This cost is often passed on to the customer. The decision to choose RuPay and UPI as the platforms which will not attract this levy, may promote these home-grown digital payment pathways over those promoted by foreign companies, including VISA and MasterCard.

In her budget speech in July, the Finance Minister had listed “BHIM UPI, UPI-QR Code, Aadhaar Pay, certain Debit cards, NEFT, RTGS, etc.” as the low-cost digital modes of payment which could be offered without the imposition of MDR in order to promote a “less cash” economy.

She had added that “RBI and banks will absorb these costs from the savings that will accrue to them on account of handling less cash as people move to these digital modes of payment.”

At that time, the Payments Council of India — an industry lobby group — had said an MDR waiver would hurt companies in the payments system.

It argued that the cost should be borne by the government instead of banks, which would have no incentive to promote digital payments without MDR revenues.

On Saturday, Ms. Sitharaman said all banks would start a campaign to promote RuPay debit cards and UPI. The government has already amended two laws — the Income Tax Act and the Payments and Settlement Systems Act — in order to implement the budget announcement, she added.

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