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All person-to-person UPI transactions remain free of Merchant Discount Rate, whatever the amount transferred.
MDR applies only to person-to-merchant transactions above Rs 2,000, leaving about 96 per cent of merchant transactions unaffected.
Small merchants receiving up to Rs 1 lakh a month through UPI QR codes continue to pay nothing.
The framework was issued under the Payment and Settlement Systems Act, 2007 after deliberations by the UPI Steering Committee, and 5 per cent of MDR collections will fund UPI adoption among small merchants.
The fee deducted from a digital payment before the merchant is credited, then shared among the merchant's bank, the customer's bank, the payment system and the app. It is borne within the merchant payment ecosystem, and the paying customer is not charged.
Umbrella organisation for retail payments in India; set up in 2008 by the Reserve Bank of India and the Indian Banks' Association under the Payment and Settlement Systems Act, 2007; a not-for-profit company under Section 8 of the Companies Act, 2013. It operates UPI, IMPS, RuPay, NACH, AePS and FASTag.
Regulator and supervisor of payment and settlement systems under the Payment and Settlement Systems Act, 2007; launched UPI123Pay with NPCI in 2022
Deliberated the applicable rates, operational arrangements and consumer safeguards before the framework was notified
The statute under which the RBI regulates payment systems in India, under which NPCI was set up, and under which this MDR framework has been introduced.
The pair that made MDR zero on RuPay debit cards and BHIM-UPI transactions from January 2020, by prohibiting charges on prescribed electronic payment modes.
The form in which NPCI is registered - a not-for-profit company, which is why it does not itself collect MDR as revenue.
Instant, round-the-clock transfers between bank accounts through a mobile device.
Key: Launched by NPCI in 2016; uses a virtual payment address so that bank details need not be shared.
Extend UPI to feature phone users without internet access.
Key: Launched on 8 March 2022 by the Reserve Bank of India with NPCI, aimed at India's several hundred million feature phone users.
Make small-value payments faster by settling them on the device.
Key: Announced in September 2022; an on-device wallet allowing low-value payments without entering the UPI PIN each time.
One interoperable platform for recurring bill payments.
Key: An NPCI system operated by NPCI Bharat BillPay Ltd, since rebranded Bharat Connect; cross-border bill payments were launched in September 2022.
General Awareness > Payment Systems and Financial Regulation
GS Paper 3 > Indian Economy > Financial Inclusion and Digital Payments
Which one of the following best describes the term "Merchant Discount Rate" sometimes seen in news?
Answer: The charge to a merchant by a bank for accepting payments from his customers through the bank's debit cards.
Consider the following statements: 1. National Payments Corporation of India (NPCI) helps in promoting the financial inclusion in the country. 2. NPCI has launched RuPay, a card payment scheme. Which of the statements given above is/are correct?
Answer: Both 1 and 2
Which of the following is a most likely consequence of implementing the 'Unified Payments Interface (UPI)'?
Answer: Mobile wallets will not be necessary for online payments.
With reference to digital payments, consider the following statements: 1. BHIM app allows the user to transfer money to anyone with a UPI-enabled bank account. 2. While a chip-pin debit card has four factors of authentication, BHIM app has only two factors of authentication. Which of the statements given above is/are correct?
Answer: 1 only
With reference to the Government of India, consider the following information: I. Directorate of Enforcement : Enforcement of the Fugitive Economic Offenders Act, 2018 : Internal Security Division-I, Ministry of Home Affairs II. Directorate of Revenue Intelligence : Enforces the Provisions of the Customs Act, 1962 : Department of Revenue, Ministry of Finance III. Directorate General of Systems and Data Management : Carrying out big data analytics... : Department of Revenue, Ministry of Finance In how many of the above rows is the information correctly matched?
Answer: Only two
Person-to-merchant transactions, and the sub-category for small merchants receiving up to Rs 1 lakh a month through UPI QR codes, which keeps zero MDR.
The fee deducted from a digital payment before the merchant is credited, shared among banks, payment service providers and app providers.
The regime in force since January 2020 under which RuPay debit card and BHIM-UPI transactions carried no MDR.