Customers will not be charged any transaction charges on payments through debit card, BHIM app and other payment made for up to Rs. 2,000 from today onwards. In a bid to push digital transactions, Union Cabinet approved a proposal that government will bear the merchant discount rate (MDR) charges on transactions up to Rs. 2,000 made through debit cards, BHIM UPI or Aadhaar-enabled payment systems. Merchant discount rate is the fee charged to a merchant by a bank for providing debit and credit card payment services.
Here's what you need to know about MDR charges:
The merchant discount rate (MDR) will be borne by the government for two years with effect from January 1, 2018 by reimbursing the same to banks.
The decision which is expected to have an impact of Rs. 2,512 crore on the exchequer, was taken at the Cabinet meeting chaired by Prime Minister Narendra Modi.
In December, the Reserve Bank of India today decided to rationalise the framework for MDR applicable on debit card transactions, based on the category of merchants.
RBI had said in December that small merchants (with turnover of less than Rs. 20 lakh last financial year) cannot be charged more than 0.4 per cent per debit card transaction and MDR paid to the bank cannot exceed Rs. 200.
For merchants with a turnover above Rs. 20 lakh (during the previous financial year), MDR will not exceed 0.9 per cent per debit card transaction and MDR paid to the bank cannot exceed Rs. 1,000.