In a bid to encourage debit card usage and increase acceptance of debit card payments across a wider network of merchants, the Reserve Bank of India today made a decision to rationalise the framework for Merchant Discount Rate (MDR) applicable on debit card transactions, based on the category of merchants.
In April the RBI had said it will come out with final guidelines on MDR charges on debit card payments and until that time the norms put in place in the wake of demonetisation were to continue.
MDR is the fee that a merchant have to pay to a bank for every transaction which is split between the bank which has issued the card, the lender whose point-of-sale terminal is being used and payment gateways like MasterCard or Visa.
According to the country's central bank, cap on "POS" (Point of Sales) has been kept at Rs 1,000 per transaction or 0.90 per cent of the transaction value for "other merchants", while that of Rs 200 or 0.40 per cent has been set for "small merchants". It added that a differentiated MDR for asset-light acceptance infrastructure and a cap on absolute amount of MDR per transaction will also be prescribed.
For merchants with annual turnover of more than Rs 20 lakh, a cap of 0.9% is prescribed for physical PoS and online card transaction while 0.8% cap is mandated for QR code based transaction. For transactions above Rs 2,000, the MDR is capped at 1 per cent.
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For small merchants, defined as those with revenue of less than Rs20 lakh, MDR would be 0.4% of transaction value or Rs200, whichever is lower. Charges for payment value of more than Rs 2000 stood at 1 percent of the transaction amount. As per the draft, based mainly on consultations with various stakeholders, it was chose to restructure MDR on the basis of merchant turnover rather than the present slab-rate based on transaction value.
Why it might be cheaper to transact through PayTM-like platforms? However, there is no RBI cap on MDR on credit card payments.
The draft also proposes that banks will ensure that all merchants display the signage "No convenience or service charge is payable by customers".
"It also supports digital payment ecosystem as QR code is a separate payment system".
MDR charge, which is levied on debit card transaction, would be even less at 0.3 percent if transaction is through digital PoS (QR Code), it had said.
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