NEW DELHI: Allowing Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions would serve as an enabling provision and is unlikely to lead to a significant increase in charges because of intense competition in the payments ecosystem, said Neelkanth Mishra, Executive Director at the World Bank Group, on Saturday.
In a conversation with IANS, on the sidelines of the 5th Kautilya Economic Conclave here, Mishra said that concerns over MDR leading to widespread fee hikes may be overstated in a free and competitive market.
"It is an enabling provision. Look, this is a free market. Unless someone is afraid that financial firms, banks or payment aggregators will start colluding and raising charges at the same time, there are different ways to handle that," he said.
"I don't see this leading to a large-scale increase in fees because it is a free and competitive market. There were firms that remained viable and survived even when they could not charge MDR," Mishra added.
On the global economic outlook, the World Bank executive identified sharply rising interest rates as the single biggest risk facing global financial markets.
"I would say that the biggest risk for global markets is the rapidly rising interest rates because financial markets are all about the cost of capital," he said.
According to Mishra, higher risk-free rates tend to depress asset values and can expose vulnerabilities in leveraged positions and collateral-backed lending structures. (IANS)
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