LIVE: Tracking Latest Stock Market Headlines & Top Developments | IBH | India Business Hour | N18L

National Payments Council Announces Merchant Discount Rate on UPI Transactions

Overview of the New MDR Implementation

• The National Payments Council has announced a merchant discount rate (MDR) of 0.4% on UPI transactions for merchants exceeding ₹2,000, effective from October 15.

• A flat MDR of ₹5 will apply to specific sectors such as railways and telecom services, while the cap for transactions above ₹75,000 is set at ₹300.

Market Reactions and Economic Context

• Global stock markets are experiencing declines due to rising expectations of a US Federal Reserve rate hike; the US 10-year bond yield has reached its highest level since 2007.

• Crude oil prices remain high with Brent crude hovering around $105 amid geopolitical tensions in Yemen involving Saudi airstrikes against Houthi rebels.

Implications for Indian Economy

• India's exports surged over 25% in August to nearly $44 billion, marking the fastest growth in five years and narrowing the trade deficit to under $27 billion.

• Tata Group shares reacted negatively following news that RBI will not exempt Tata Sons from listing shares of group companies.

Detailed Breakdown of MDR Changes

Key Features of the New MDR Regime

• The new MDR regime introduces fees for larger UPI payments after three years of zero charges; it aims to make the system financially sustainable while keeping it free for everyday users.

• Person-to-person (P2P) payments remain free regardless of amount, constituting 37% by volume and 70% by value of all UPI transactions.

Fee Structure Explained

• The fee structure includes a 40 basis points charge on person-to-merchant (P2M) transactions over ₹2,000; however, there is a hard cap at ₹300 per transaction.

• Certain sectors like railways and agriculture will pay a flat fee instead of a percentage-based charge; small vendors earning up to ₹1 lakh monthly through UPI will continue paying zero MDR.

Consumer Protections Under New Regulations

Safeguards Against Additional Charges

• Government regulations prevent merchants from passing on MDR costs to consumers; banks are responsible for ensuring compliance with these rules.

• A dedicated fund will be established using 5% of collected MDR to enhance UPI acceptance among small merchants in underserved regions.

Insights from Industry Experts

Discussion with Vishwas Patel

• Vishwas Patel emphasizes that consumers will not incur additional costs due to this new fee structure; most transactions remain unaffected as they fall below the threshold.

• He clarifies that only about 4% of merchant transactions exceed ₹2,000 and thus would be subject to this new charge.

Economic Sustainability Concerns

• Patel discusses a projected revenue estimate from the new MDR regime amounting to approximately ₹15,000 crores based on current transaction volumes.

Addressing Public Concerns About Fees

Potential Impact on User Behavior

• There are concerns regarding whether customers might revert back to cash or debit cards due to these changes; Patel reassures that most users will still benefit from free services.