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To give a push to digital payment adoption, the Centre should foot the merchant discount rate (MDR) bill and pay the amount directly to banks, a top national-level traders’ body said on Tuesday.
This should be done rather than let MDR become a ‘bone of contention’ between the merchants and the consumers, the Confederation of All India Traders (CAIT) said.
Simultaneously, the Centre should provide tax rebates and incentives for consumers of certain types of digital payments (government receipts, petrol and education) to encourage adoption of digital payments. There should also be tax rebates for merchants either in the form of sales tax/GST relief.
“MDR pinches each and everybody. After holding 300 conferences across the country, I have come to the conclusion that MDR is a major deterrent to digital adoption in the country,” Praveen Khandelwal, Secretary General, CAIT, told BusinessLine on the sidelines of an event here.
Simply put, MDR is the rate charged to a merchant by a bank for providing debit and credit card services. In India, most merchants want consumers to bear the cost of MDR for availing card-related payment facility.
Meanwhile, a report jointly put together by the CAIT and the Alliance for Digital Bharat (ADB) has called for an independent and separate regulatory authority to regulate the digital payment system in India. This report on ‘Universal Access to Infrastructure and Open Payment Systems’, among other things, calls for the implementation of recommendations made by the Watal committee on digital payments.
“We request the government to adopt the recommendations of the Watal committee report in full,” Khandelwal said.
CAIT and ADB together represent 6.34 crore traders and small businesses. The report also called for formation of a digital payments adoption board consisting of payment technology providers, banks and financial institutions, representatives from traders and other verticals of the non-cooperative sector, and senior government officials.
Today, 96 per cent of transactions in India are done in cash and the country has only about 25 lakh point-of-sale (POS) terminals.
This needs to increase rapidly given India’s population, geography and number of merchants. Additionally, the acceptance infrastructure favours large businesses and retailers.
Demonetisation and GST have dramatically accelerated the need for traders, merchants and the small business community to accept electronic payments.
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