Indian Bank MD and CEO Binod Kumar said the lender may consider a waiver of 0.28% Merchant Discount Rate (MDR) charges on UPI transactions. He highlighted that the bank currently earns nothing from UPI, while the payment system has significantly benefited the lender by reducing manpower requirements and easing cash handling activities.
Speaking to NDTV Profit on possible waiver, Binod Kumar said, "I won't mind if we can explore or contemplate if waiving off charges bank will be earning," adding that the Indian Bank board will eventually make a decision.
His remarks came in response to reports stating that Indian Bank could waive off 0.28% share of MDR that will go to the customer's issuing bank.
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Indian Bank MD and CEO further mentioned that the introduction of MDR would be incrementally positive for banks, although it is unlikely to have a substantial impact on their income. He added that the implementation of MDR is not expected to materially affect the bank's profitability.
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Last month, the government narrowed the free UPI window and introduced a flat levy of Rs 5 on select transactions worth over Rs 2,000. For large merchant payments above Rs 2,000, a levy of 0.4% will be imposed. This fee, however, will be capped at Rs 300, the National Payments Corporation of India (NCPI) said in a statement on Tuesday.
Where Does MDR Go?
The 0.4% MDR is distributed among various players in the UPI payment ecosystem. Out the total charge, 40% goes to the issuing bank, or the customer's bank, while 30% goes to the merchant acquirer, which could be the merchant's bank or payment gateway, NDTV Profit earlier reported. Another 20% goes to the UPI app or Third-Party TPAP, while the remaining 10% goes to the payer PSP bank. The government receives no share of the 0.4% MDR, sources noted.
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