From The Economic Times · PTI · · 1m 30s
IIT-Bombay Study Recommends MDR Cut to 0.08% from 0.4%
IIT-Bombay study urges MDR reduction to 0.08% from 0.4% for UPI transactions, excluding banks from bulk share.
In brief
IIT-Bombay study urges MDR reduction to 0.08% from 0.4% for UPI transactions, excluding banks from bulk share. IIT-Bombay recommends cutting UPI merchant discount rate from 0.4% to 0.08% and excluding banks from taking bulk share to improve digital payments. Originally reported by The Economic Times.
IIT-Bombay Study Recommends MDR Reduction
IIT-Bombay study recommends cutting UPI merchant discount rate from 0.40 per cent to 0.08 per cent.
“Mumbai, Merchant discount rate (MDR) on UPI transactions should be cut to 0.08 per cent from the present 0.40 per cent”
Current MDR Split Unfair
Current model splits 70 per cent of MDR between issuer and acquirer banks, excluding third-party providers.
“In the present model, a bulk 70 per cent is split between the issuer and acquirer banks”
Banks Overcompensated via CASA
Banks earned over Rs 4.85 lakh crore in net interest margin from CASA deposits in FY26, a disproportionate compensation.
“Banks booked over Rs 4.85 lakh crore in net interest margin (NIM) through CASA deposits in FY26”
Proposed 3% Fund for UPI Ecosystem
Banks should carve out 3 per cent of funds sacrificed by CASA depositors to run and improve UPI ecosystem.
“To run and improve the UPI ecosystem, banks should carve out, say, about 3 per cent of the funds (Rs 15,000 crore) sacrificed by CASA depositors”
RBI and Government to Direct UPI as Service
RBI and government must make UPI a necessary service for banks to remain in business, like CBS.
“It also asked the RBI and government to provide directions on making UPI as part of necessary service to be provided to remain in the banking business”
Transaction Cost Concerns
Transaction cost of Rs 300 for UPI transactions over Rs 75,000 raises questions about the reasonableness of the cap.
“The paper said a transaction cost of Rs 300 for a peer-to-merchant transaction of Rs 75,000 and above”
Credit Card MDR Reduction Needed
Credit card MDR should be reduced to address concerns that credit card users burden P2M UPI users.
“It recommended reducing credit card MDR to address concerns that credit card users are burdening P2M UPI users”
Merchant Turnover Threshold for UPI
Merchants with annual turnover of Rs 50 crore or more must provide UPI to ensure ecosystem sustainability.
“The paper suggested that merchants with annual turnover of Rs 50 crore or more must provide UPI as a means of accepting payments”
The headline
IIT-Bombay recommends cutting UPI merchant discount rate from 0.4% to 0.08% and excluding banks from taking bulk share to improve digital payments.