Mumbai, Feb. 16: The Reserve Bank of India (RBI) today proposed to drastically cut MDR charges on debit card payments from April 1 to further push digital payments, particularly among the smaller merchants.
Merchant Discount Rate, or MDR, will now be levied on the basis of turnover instead of the present slab-rate which is based on the transaction value. MDR is the commission paid by the merchant to a bank for transactions conducted on the point of sale machine (PoS) installed by the lender.
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 cap on MDR on credit card payments.
After demonetisation, the RBI has reduced the charge till March 31. The new charges, according to the RBI draft, will come into effect from April 1.
For small merchants with annual turnover of Rs 20 lakh and special category merchants, such as utilities, insurance, mutual funds, educational institutions and government hospitals, the MDR has been proposed at 0.40 per cent of the transaction value.The levy will be even less at 0.3 per cent if the transaction is through digital PoS (QR Code), the RBI said in a draft circular.
The RBI proposes to divide merchants into four categories - small merchants with turnover outside the ambit of GST (turnover less than Rs 20 lakh annually), government transactions, special category of merchants and rest with turnover within the ambit of GST (turnover above Rs 20 lakhs/year).
In the case of government transactions, a flat fee of Rs 5 has been proposed for transaction value up to Rs 1,000 and Rs 10 for transaction value of Rs 1,001 to Rs 2,000. The MDR will not exceed 0.50 per cent for transaction value above Rs 2,001 with a cap of Rs 250 per transaction.
For other merchants, the MDR will not exceed 0.95 per cent and 0.85 per cent (in case of digital PoS).
The draft also asks banks to ensure that all merchants display the signage "No convenience or service charge is payable by customers".
The RBI added that the MDR for debit cards for petrol and fuel will be decided after the industry consulation process with the Oil Ministry is concluded.
