RBI to rationalise merchant discount rate for debit card transactions; final guidelines today

The Reserve Bank of India will rationalise the merchant discount rate on debit card transactions, the central bank said in a press release after the monetary policy committee review meeting on Wednesday. The move is aimed at giving a fillip to the digital transactions, a thrust area for the government but not yet picking up as expected.

"With a view to giving further fillip to acceptance of debit card payments for purchase of goods and services across a wider network of merchants, it has been decided to rationalise the framework for Merchant Discount Rate (MDR) applicable on debit card transactions based on the category of merchants," the RBI said in the release.

Representational image. Reuters

Representational image. Reuters

"A differentiated MDR for asset-light acceptance infrastructure and a cap on absolute amount of MDR per transaction will also be prescribed," it said.

The revised rate is aimed at achieving the twin objectives of increased usage of debit cards and ensuring sustainability of the business for the entities involved, the release said adding a revised instruction will be issued later.

After the demonetisation of Rs 500 and Rs 1,000 notes in November 2016, the central bank had cut the debit card MDRs and revoked the levies on small transactions through mobile phones and internet from 1 January to 31 March 2017.

The MDR for debit card payments, including for payments made to the government, were capped at 0.25 percent for transactions up to Rs 1,000 and 0.5 percent between Rs 1,000-2,000.

Earlier, the MDR cap was 0.75 percent for transactions up to Rs 2,000 and 1 percent for over Rs 2,000. However, there is no RBI cap on MDR on credit card payments.

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.

As per the draft guidelines issued in February 2017, the MDR has been proposed at 0.40 percent of the transaction value for small merchants with annual turnover of Rs 20 lakh and special category merchants, like utilities, insurance, mutual funds, educational institutions and government hospitals.

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.

The draft also proposes that banks will ensure that all merchants display the signage "No convenience or service charge is payable by customers".

(With input from PTI)

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Updated Date: Dec 06, 2017 15:56:46 IST

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