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  Business   In Other News  16 Dec 2017  Card transaction costs lowered for 2 years

Card transaction costs lowered for 2 years

THE ASIAN AGE.
Published : Dec 16, 2017, 1:19 am IST
Updated : Dec 16, 2017, 1:19 am IST

Centre to bear cost of transaction of up to Rs 2,000; reluctant merchants will have no more excuses.

MDR is the charge paid by a shopkeeper to a bank for facilitating payment from customers through debit cards.
 MDR is the charge paid by a shopkeeper to a bank for facilitating payment from customers through debit cards.

New Delhi: In order to promote cashless economy, the government will subsidise debit card, BHIM UPI, and Aadhaar-enabled Payment System (AePS) transactions of upto Rs 2,000.

The Union Cabinet on Friday decided that the Merchant Discount Rate (MDR) applicable on all debit card, BHIM UPI and Aadhaar-enabled Payment System (AePS) transactions upto Rs 2,000 will be borne by the government for a period of two years from January 1, 2018 by reimbursing it to the banks.

MDR is the charge paid by a shopkeeper to a bank for facilitating payment from customers through  debit cards.

A dipstick survey by this newspaper in December 2016 found that one of the main reasons for small merchants’ reluctance to switch to card-based payments is the high transaction cost.

Last week, RBI had said that from January 1, 2018, MDR for debit cards would be 0.4 per cent or Rs 200 per transaction, whichever is lower for merchants with turnover of up to Rs 20 lakh.

For other merchants, the MDR cap will be 0.9 per cent or Rs 1,000 per transaction, whichever is lower.

“As a result of this approval, for all transactions less than Rs 2000 in value, the consumer and the merchant will not suffer any additional burden in the form of MDR thereby leading to greater adoption of digital payment modes for such transactions. Since such transactions account for sizeable percentage of transaction volume, it will help to move towards a less cash economy,” said IT minister Ravi Shankar Prasad.

The value of digital transactions during April-September 2017 was Rs 2.18 lakh crore and for the current financial year it is estimated to be around Rs 4.37 lakh crore.

It is estimated that the MDR to be reimbursed to the banks in respect of transactions less than Rs 2000 in value would be Rs 1,050 crore in FY19 and Rs 1,462 crore in FY20.

“When payment is made at a merchant point of sale, MDR is payable by the merchant to the bank. Citing this, many people make cash payments inspite of having debit cards. Similarly, MDR is charged on payments made to merchants through BHIM UPI platform and AePS,” said the minister.  

A Committee comprising secretaries of department of financial services, ministry of electronics and IT and the CEO, National Payment Corporation of India (NPCI) will look into the industry cost structure of such transactions which will form the basis to determine the levels of reimbursement.

Tags: bhim, merchant discount rate (mdr) charges, merchant discount rate