Banks and NPCI agree to have 2% MDR for RuPay credit cards

By Puja Sharma

Among the 2% merchant discount rate (MDR) charge, 1.5% will go to the issuing bank, and the rest will be shared between RuPay and the acquiring entity. Credit cards are about to be linked to UPI by the NPCI and banks, according to the reports.

The NPCI and banks have come to a consensus on the MDR for credit card transactions on the RuPay-UPI and have agreed to a Merchant discount rate on UPI-RuPay credit cards likely to be 2%.

Credit-card transactions with RuPay-UPI are scheduled to begin by mid-September Banks and the National Payments Corporation of India (NPCI) are holding talks.

Among the 2% merchant discount rate (MDR) charge, 1.5% will go to the issuing bank, and the rest will be shared between RuPay and the acquiring entity. Credit cards are about to be linked to UPI by the NPCI and banks, according to the reports. The Payments body is in talks with several banks for the linking to start in the next two months, according to its CEO Dilip Asbe.

In early June of this year, the Reserve Bank of India (RBI) proposed linking credit cards with UPI in its Statement on Developmental and Regulatory Policies.

In May 2022 itself, 2.4 lakh crore transactions were processed via UPI. By linking credit cards as well as the digital payments network of other countries to the UPI platform, we will witness a surge in the number and the volume of transactions processed. Third, relates to the subsidy claim process under the Payment Infrastructure Development Fund Scheme, which has set the target of increasing the option of POS, QR codes, and mobile payments across tier 3 to tier 6 cities.

The NPCI will go with a 2% merchant discount rate (MDR) for RuPay credit cards on UPI as well, as is the case with all other credit cards. Around 1.5% will go to the issuing bank and 0.5% will be shared by the acquiring entity and RuPay of the 2% MDR to be charged.

Payment processing fees are paid by merchants to banks as part of the payment processing process. Each transaction is based on a percentage, which banks and credit card companies use to determine how much they make. A debit card transaction’s MDR is capped at 0.9%. A credit card transaction’s MDR is capped at 2%. A debit card transaction’s MDR is capped at 0.5%.

Dilip Modi, Founder of Spice Money on the RuPay-UPI agreement to a Merchant discount rate said, “UPI has gained massive traction over the last couple of years and one of the major reasons behind its popularity is the zero MDR policy which allows merchants to accept payments without paying any charges, unlike in the case of credit cards. We welcome the move of NPCI rolling out a framework announcing a charge of 2% on credit-card transactions via RuPay-UPI since unlike in the case of debit cards, MDR is important for credit card businesses owing to an interest-free credit period of 45 days, and an unsecured transaction. This MDR will ensure margins for the issuing banks and the acquiring entities and will encourage them to accelerate the adoption of UPI among consumers. I firmly believe that going forward, this can significantly boost India’s already growing digital payments ecosystem.”