To Encourage Digital Payments, MDR To Be Refunded By Government On Transactions Up To Rs 2,000
The MDR (merchant discount rate) charges will be bared by the government on transactions equal to Rs 2,000 done through Aadhaar-enabled payment system (AePS), BHIM UPI, or debit cards to encourage digital transactions, as said by Ravi Shankar Prasad, the IT Minister.
MDR is applicable on disbursements done to traders through AePS and BHIM UPI platform. The MDR will be endured by the government for 2 years with enforcement from January 1, 2018 by compensating the equal to the banks.
The drive will have an effect on the exchequer of Rs 2,512 Crore. The pronouncement was made at the Cabinet meeting directed by Narendra Modi, Prime Minister, as stated by Prasad. The minister said, “For all the dealings below Rs 2,000 in worth, the merchant and the customer will not undergo any surplus liability in the form of MDR.” He also added that this will result in the greater implementation of the digital payment means for such dealings.
The minister mentioned as such transactions make up a substantial fraction of transaction bulk, the verdict will assist to shift toward the less-cash economy. Further, Prasad mentioned digital transfers during April–September 2017 were priced at 2.18 lakh crore. The minister added, “This sum is projected to be Rs 4.37 lakh crore for the entire of the financial year.”
When payment is done at a merchant point of sale, merchant discount rate is to be paid by the merchant to the bank. Mentioning this, several individuals make cash disbursements even if having debit cards. A board including Secretary of the Ministry of Electronics & IT; the CEO of NPCI; and Secretary of the Department of Financial Services, will check out the industry cost framework of such transfers that will make the source to define the reimbursement levels, Prasad said.
Thus, the Reserve Bank, to encourage digital payments, has also surfaced with distinguished MDR for the debit card transactions, recommending separate limits for large and small merchants. According to the notification of RBI, the MDR fees for small merchants with a yearly income of up to Rs 20 Lakh has been set at 0.40% with a limit of Rs 200 for every transaction through debit cards via online transactions or Point of Sale machines.
In case the yearly revenue of a trader is above Rs 20 Lakh, then the MDR fees would be 0.90% with a limit of Rs 1,000 for every transaction. If the transfer is via QR code, the fees will be 0.80% with a similar limit.