The Centre likely to propose a significant overhaul of the legal framework governing the zero-Merchant Discount Rate (MDR) regime for digital payments by introducing amendments to the Payment and Settlement Systems Act and Income Tax Act.
The current framework for zero MDR will be replaced with a notification-based mechanism. The amendment will empower the Central Government to notify the digital payment modes that will continue to enjoy exemption from MDR. At present, merchants cannot be charged MDR on standard UPI and RuPay debit card transactions.
If enacted, the amendments could pave the way for MDR to be levied on digital payment modes that are not notified by the Centre for exemption. While the Bill itself does not explicitly impose MDR on any payment instrument, it narrows the statutory no-MDR protection to only those payment modes that are specifically notified by the government.
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The proposal gives the Centre greater flexibility to periodically decide which digital payment modes should continue to receive zero-MDR status, allowing the framework to evolve with changes in the payments ecosystem.
Once the Bill is passed and brought into force, the detailed operational framework is expected to be notified by the Centre, in consultation with the Reserve Bank of India (RBI). The final rules are likely to specify the payment modes that will continue to enjoy zero MDR and lay down the implementation framework for the revised regime.
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