The State Bank of India and National Payment Corporation of India (NPCI) have asked the government to ensure equal treatment of RuPay debit card along with Visa and Mastercard on the processing charge waiver. The banks claimed that it would otherwise put them in an unfair position.
The main issuers of RuPay card are SBI and other state-run banks. The banks fear that the government decision to scrap processing charges on transactions would cause them revenue loss. NCPI believes this would disincentivise banks to issue RuPay cars. They’d prefer international rivals over home-grown payment gateway.
In its letters to Finance Ministry and the Cabinet Secretary, NCPI asked for keeping RuPay outside the ambit of zero-merchant discount rate (MDR) scheme. On UPI transactions, which have also been made cost-free for merchants processing digital payments from January 1, it asked the government to come up with a framework to compensate banks for the lost revenue. NPCI estimated that this compensation could cost approximately ₹2,000 crore for FY21.
It further noted that projects like National Common Mobility Card, RuPay credit card and RuPay globalisation could be adversely affected if the government doesn’t provide any assistance.
Similarly, SBI in its letters has called for extending MDR waiver to all networks to ensure a level playing field.
However, the government is contemplating an industry-wide MDR waiver. But having received feedback from stakeholders, the government is also devising a mechanism to reimburse banks and payment companies for losses incurred while processing transactions.
MDR is the fee accrued by banks. It’s generally levied from the merchants processing transactions.
At present, MDR charges are capped at 0.6 per cent of card-based transactions for payments over ₹2,000. MDR below ₹2,000 for banks are borne by Ministry of Electronics and Information Technology.
As per the latest RBI data, in October, RuPay cards contributed 33 per cent to volume and 28 per cent to value of the overall that happened through debit cards.
Several banks and payment companies have raised concerns with the Finance Ministry after it announced to waive MDR on RuPay cards. The banks and companies are of the opinion that the move is not only discriminatory but also creates obstacles in achieving India’s goal of becoming a cashless, digital economy.