In December, the government said transactions done through RuPay and Unified Payments Interface (UPI), floated by NPCI, will attract zero MDR.
Such reduction impacted the survival of payment gateway entities, “hampering innovation efforts and resulting in job losses and a slowdown in the expansion of the digital payment infrastructure in India,” the report of the committee said.
The MDR reduction has led to contraction in the national gross value of services and to significant contraction in the revenue of the payments business which supports multiple participants in the eco system. Most of the players are from small and medium enterprises (SME) background and they have been affected badly.
“The payments ecosystem together with the downstream vendors/providers etc. directly and indirectly employ several lakh people and without revenues from businesses, these jobs are disappearing as there are no incentives or incomes for deploying QR codes in the country’s hinterlands,” the report said.
The fintech space also attracted over $2 billion of capital in the last two years. But the reduction in MDR rate meant the space may not attract capital in the future. “The expectation of revenue generation from digital transaction processing has been severely affected by Zero MDR,” said the report.
The payments industry has spent more than Rs 2,000 crore in digital payments
promotion and continues to invest more than Rs 1,000 crore in capital expenditure annually, the committee noted. Such action by the government will impact the ability to achieve the government’s goal of 4000 crore digital transactions and digital India initiative, it said.
The committee is headed by D.B.Phatak Professor Emeritus at Indian Institute of Technology, Mumbai, Arvind Kumar Director General, Standardisation Testing and Quality Certification (STQC), at Ministry of Electronics and Information Technology, Sunil Mehta Chief Executive, Indian Banks' Association, A.S. Ramasastri, Institute for Development of Research in Banking Technology, Dilip Asbe Managing Director and CEO, National Payments Corporation of India (NPCI), Vishwas Patel Chairman, Payments Council of India.