RBI Governor Sanjay Malhotra has indicated that discussions surrounding the implementation of Merchant Discount Rate (MDR) for digital payments are currently "premature," advising stakeholders to observe policy developments closely.
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Key Points
- RBI Governor Sanjay Malhotra deems discussions on Merchant Discount Rate (MDR) for digital payments "premature," urging a "wait-and-watch" approach.
- Malhotra highlights the necessity of investment in public payment infrastructure, stating costs must be covered either by taxpayers or through MDR via a "user pays" model.
- The government is currently moving amendments to statutes governing digital payments, influencing the future of MDR.
- Despite ongoing debate, the usage of digital payment platforms like UPI continues to grow significantly in India.
- The RBI is also promoting the growth of its central bank digital currency (e-rupee) and the Unified Lending Interface (ULI) platform to streamline loan disbursals.
Amid speculation over whether amendments being moved by the government to statutes governing digital payments will kick off the merchant discount rate, RBI Governor Sanjay Malhotra on Wednesday said it is "premature" to talk about the issue right now and advised a wait-and-watch.Investment in public infrastructure like payments is necessary, he said, reiterating that someone will have to pay for it.
Understanding The Cost Of Digital Payments
Speaking to reporters at the customary post-policy review interaction, Malhotra said the choices before us are simple: either the general public has to pay for it through taxes, or we have to levy the merchant discount rate (MDR), following the 'user pays' model."Right now the government is getting us the amendment. Costs have to be paid by someone. We all want this public infrastructure to strengthen and become more efficient, etc. We continue to do that. That is our focus right now; let us wait and watch for further developments," Malhotra said.
The Ongoing MDR Debate And UPI Growth
Levy of MDR has become a vexed issue in the country as bankers and other stakeholders in the payment industry have been pressing for it, and the government has so far not moved in the matter, and the usage of digital payments like the UPI platform has continued to grow at a handsome pace.Some watchers have been expecting MDR to set in for UPI transactions above a certain value between a merchant and customer, and not in the case of peer-to-peer payments.The important aspect is that someone has to pay for the service, the RBI Governor said.Malhotra said under the 'use-pays' principle, it is the person or the merchant who is transacting who gets charged through the levy of MDR, but added that even if there is no MDR in place, the general public pays for it through the taxes."What is important is that we continue to invest and continue to find the means, whether it is MDR or others. Let us wait and see how the situation evolves," he said.
RBI's Broader Digital Initiatives
Meanwhile, Deputy Governor Rohit Jain said the central bank's digital currency usage is growing, and the Reserve Bank is urging banks to find new cases for the e-rupee.Thrust is also being provided on the use of the unified lending interface (ULI) platform by lenders, which is intended to significantly reduce the time taken for disbursing loans, he added.At present, 12 states have digitised their land records, which is an important component essential for the success of the ULI platform, and many more are in the process of doing the same, Jain said.
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