Fintech Industry Faces Rs 500-600 Cr Loss as Govt Ends RuPay Debit Card Subsidy

The digital payments industry is set to incur losses of Rs 500-600 crore following the government's decision to withdraw subsidy support for RuPay debit cards.

According to reports, the government has allocated Rs 1,500 crore for UPI payment subsidies in FY25, but this support is limited to small merchants.

Industry insiders had anticipated an allocation of around Rs 5,500 crore, considering last year’s Rs 3,681 crore subsidy. The government has been providing financial support to banks and fintech firms to offset losses from the zero-merchant discount rate (MDR) mandate on UPI and RuPay debit cards. MDR is a fee charged to merchants for processing digital payments, and without it or government subsidies, banks find such transactions unsustainable.

A senior banker revealed that many large banks have significantly reduced the issuance of RuPay debit cards due to the lack of revenue, shifting instead to Mastercard and Visa cards. The share of RuPay debit cards in total card payments remains below 30%, with Reserve Bank of India (RBI) data indicating around 119 million debit card transactions for merchant payments in January 2024.

The fintech industry, through the Payments Council of India, is now planning to approach the finance ministry, urging either the reinstatement of MDR or an increase in the subsidy allocation. Industry leaders are advocating for a 0.25% MDR on debit card transactions to sustain digital payments.

Experts argue that the lack of MDR is hampering efforts to promote domestic payment networks. With major banks cutting back on RuPay card issuance, the National Payments Corporation of India (NPCI) is losing a significant business opportunity.

There is already a proposal under consideration to reintroduce MDR for large merchants with an annual GST turnover above Rs 40 lakh. Industry observers speculate that the subsidy withdrawal may signal the government’s intent to restore MDR, ensuring long-term sustainability for digital payments.

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