IIT-B report wants UPI MDR cut; says banks should forgo their share

With a Merchant Discount Rate (MDR) on merchant UPI transactions being announced above Rs 2,000, professors at IIT-Bombay have come out with a report proposing reducing the MDR to 0.08% from 0.40%.The report's authors, Ashish Das, a professor in IIT-Bombay's Department of Mathematics, and Pragya Das, a former RBI official, have argued that third-party application providers (TPAPs), such as PhonePe and Google Pay, as well as payment service providers (PSPs), which are predominantly banks, should receive compensation for the services they provide.The study recommends setting the MDR share for TPAPs at 0.06%, lower than the 0.08% proposed by the National Payments Corporation of India (NPCI), while keeping the PSP share unchanged at 0.02%.Under the existing arrangement, banks that issue and acquire transactions collectively receive the bulk of the revenue, with a 70% share split between them.