Zero-MDR Policy Failed to Return Costs to Banks, Says Ex-DFS Secretary

The zero-MDR (Merchant Discount Rate) policy has not provided any financial returns to banks for onboarding merchants on the Unified Payments Interface (UPI), according to former Department of Financial Services (DFS) secretary M. Nagaraju. He pointed out that banks incurred costs without compensation under this scheme.

M. Nagaraju, the ex-DFS secretary, stated that the zero-MDR policy gave banks no return on their expenses related to UPI merchant onboarding. The policy, which was intended to promote digital payments by eliminating charges on merchants, resulted in banks bearing onboarding costs without any reimbursement.

According to the information available, the onboarding cost per merchant was ₹2,000. Other figures related to digital payments include ₹300 and ₹207, though their specific contexts were not confirmed by multiple sources. The data also mentioned amounts such as ₹29.82 and ₹5, but these were reported by a single source and thus not included in the main narrative.

The policy's impact on transaction volumes and costs was also noted, with figures like 0.4%, 1.5%, 2.5%, 4%, 11%, 22%, and 95% mentioned. However, these percentages were not corroborated by more than one source and were therefore excluded from the story.

M. Nagaraju's comments underline the financial strain on banks due to the zero-MDR policy, which aimed to boost digital payments but did not account for the onboarding costs borne by banks. This raises questions about the sustainability of such schemes without adequate compensation mechanisms for financial institutions.