Why in News?
The Finance Ministry introduced a Bill to amend the Payment and Settlement Systems Act, 2007, allowing Merchant Discount Rate (MDR) to be levied on specified UPI and other digital-payment transactions.
What is MDR?
- Merchant Discount Rate is the fee paid by a merchant to banks or payment providers for processing a digital transaction.
- UPI has operated with zero MDR since 2020; the proposal would allow charges for specified transactions, with the source indicating a focus on larger merchants while small businesses remain exempt.
- The policy debate is about balancing low-cost digital payments with a sustainable revenue model for payment infrastructure.
Exam Connect
- UPI → operated by NPCI under RBI oversight
- Payment and Settlement Systems Act, 2007 → legal framework for payment systems
- RBI → designated authority for payment-system regulation