Plan to charge zero MDR for large merchants is faulty, says expert

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Updated: August 20, 2019 2:31:12 AM

Finance minister Nirmala Sitharaman in the FY20 Budget abolished MDR charges for all merchants having a turnover of over Rs 50 crore which would lead the payment companies taking a hit on their margins.

zero MDR, MDR, VISA, FIBAC, IBA, Indian Banks’ Association, economy newsRamachandran added that payment schemes just charge a reasonable compensation to provide their services and if the government and merchants are saving on the cost of cash, a “silver” of it could be passed on to schemes responsible for building the network.

The plan to charge zero merchant discount rate (MDR) for large merchants is faulty as it takes away all incentives to offer payment services, said TR Ramachandran, group country manager for South Asia at VISA, while speaking at FIBAC, a banking conclave organised by the Indian Banks’ Association (IBA) and industry body FICCI.

Finance minister Nirmala Sitharaman in the FY20 Budget abolished MDR charges for all merchants having a turnover of over Rs 50 crore which would lead the payment companies taking a hit on their margins.

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Ramachandran added that payment schemes just charge a reasonable compensation to provide their services and if the government and merchants are saving on the cost of cash, a “silver” of it could be passed on to schemes responsible for building the network. “I find the logic a bit fallacious because the cost is not free. If there is no skin in the game to for anybody to deploy terminals, how is there going to be any infrastructure,” he said. Companies like VISA, Mastercard and RuPay are classified as payment schemes.

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