Money & Banking

Govt mulls reducing MDR charges on card payments

PTI New Delhi | Updated on January 13, 2018

The government is working to reduce Merchant Discount Rate (MDR) charges to encourage digital payments, Niti Aayog CEO Amitabh Kant said today.

“We are pushing digital transactions. Our aim is to bring down MDR charges. Also if volume of transactions increase, MDR charges will come down,” Kant said.

Referring to RBI’s recent draft circular on rationalisation of MDR for debit card transactions, the Niti Aayog CEO said, “We are examining RBI’s draft circular on MDR.

There are challenges to see MDR rates come dowm...We will meet those challenges.”

Last week, RBI had proposed to drastically cut MDR charges on debit card payments from April 1 with a view to maintain momentum of digital transactions post note ban, especially among small merchants.

For small merchants with annual turnover of Rs 20 lakh and special category merchants, like utilities, insurance, mutual funds, educational institutions and government hospitals, the MDR charge has been proposed at 0.40 per cent of the transaction value.

Merchant Discount Rate (MDR) charge, which is levied on debit card transaction, would be even less at 0.3 per cent if transaction is through digital PoS (QR Code), the RBI had said in a draft circular on rationalisation of MDR for debit card transactions.

The existing MDR is capped at 0.75 per cent for transactions up to Rs 2,000 and 1 per cent for over Rs 2,000.

However, there is no RBI cap on MDR on credit card payments.

Post demonetisation, the RBI has reduced the charge till March 31. The new charges, as per the RBI draft would come into effect from April 1.

MDR for debit cards for petrol/fuel shall be decided subsequently after the industry consultation process with Oil Ministry is completed, the Reserve Bank had proposed.

As per an official document, the allocation for making payment to RBI towards reimbursement of Merchant Discount Rates (MDR) charges for 2017-18 is Rs 200 crore. It is estimated at Rs 50 crore this fiscal.

Post demonetisation, the Finance Ministry had announced that MDR charges will be absorbed by the government for payments of tax, non—tax and other payments to the government by citizens using debit cards.

Published on February 21, 2017

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