Because of this, the consumer and the merchant will not suffer any additional burden in the form of MDR. This is expected to give a boost to digital payment modes for such transactions.
The government also believes that this will be game changer move since the transactions that fall in this bracket are of sizeable percentage and thus, will help to move towards less cash economy.
It is worth mentioning that the merchant discount rate is paid by the merchant to the bank. Similarly the MDR is charged on payments made to merchants through BHIM UPI and AePS.
Cabinet decides that Merchant Discount Rate (MDR) applicable on all debit card/BHIM UPI/ AePS transactions up to and including a value of Rs. 2000 will be borne by the Government for a period of two years with effect from 1st January, 2018 by reimbursing the same to the banks pic.twitter.com/U7xBiMwNnv— Frank Noronha (@DG_PIB) December 15, 2017
Last year, the government had rolled out demonetization in a move to fight black money and also to shift towards digital economy. For some months, the number and pace of digital transactions rose exponentially.
The number of digital transactions rose by 58% in one year after demonetization.
Last year, PM Modi launched BHIM app in a bid to promote digital transactions. The Aadhaar-based mobile payment application was launched in a bid to allow people to make digital payments directly from their bank accounts. The PM Modi, at the time of launch of BHIM app, also said that digital transactions will be rewarded with raffle-like cash prizes from the government.