NEW DELHI: To encourage the use of debit cards and government approved mobile apps, the Union Cabinet on Friday cleared a proposal that imposes no charges on merchants for transactions up to Rs 2,000 from January 1, 2018, until 2020. The Union Cabinet which met on Friday waived off merchant discount rate (MDR) applicable on all debit cards, Bharat Interface for Money (BHIM) Unified Payment Interface (UPI) and Aadhaar-enabled payment system (AePS) transactions up to and including a value of Rs 2,000.
The Cabinet meet chaired by Prime Minister Narendra Modi decided that whatever MDR charges the merchants would have paid to banks for transactions would be reimbursed by the government. It is estimated that the MDR charges to be reimbursed to the banks for transactions less than Rs 2,000 would be Rs 1,050 crore in financial year 2018-19 and Rs 1,462 crore in 2019-20.
When payment is made at a merchant point of sale, MDR is payable by the merchant to the bank.
Many merchants ask the customers to bear the cost, if they wish to use the debit cards and consequently, many are forced to cough up cash despite having debit cards.
What is MDR?
Merchant discount rate (MDR) is the rate charged to a merch-ant by banks for providing debit and credit card services when payment is made at a point of sale. In most cases, the charge is passed on to the customer by the merchant.