Centre to waive MDR charges on debit card payments upto Rs2000

Centre to waive MDR charges on debit card payments upto Rs2000

Centre to waive MDR charges on debit card payments upto Rs2000

"The Union Cabinet chaired by Prime Minister Narendra Modi has approved that the merchant discount rate (MDR) applicable on all debit card/BHIM UPI/Aadhaar enabled Payment System (AePS) transactions up to and including a value of Rs 2,000 will be borne by the government for a period of two years with effect from 1st January, 2018 by reimbursing the same to the banks", an official statement said after the Cabinet meeting.

With this move, the consumers and merchants will no longer have to bear the burden of MDR at least for the next two years as long as the transactions remain under the ₹2000 slab, thus paving the way for an infrastructure that has greater card-acceptance, and a cashless economy. It is estimated that the MDR to be reimbursed to the banks in respect of transactions less than Rs 2,000 in value would be Rs 1,050 crore in fiscal year 2018-19 and Rs1,462 crore in FY 2019-20.

Well, the government has given the green signal for a proposal, under which you will not be charged for BHIM, UPI, and debit card transactions up to ₹2000. "The MDR charges on transactions up to ₹2,000 shall be reimbursed by the government to the banks", said Ravi Shankar Prasad, Electronics and IT Minister. Given that the average debit transaction in India is beneath Rs 1,500, bearing debit cards will turn out to be practically as shabby as tolerating money for little dealers.

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Presently, for transactions below Rs 1,000 the MDR is 0.25 per cent and transactions between Rs 1,000 and Rs 2,000 now attract an MDR of 0.5 per cent, while one per cent MDR is levied against transactions of Rs 2,000 or more.

In a tweet, Amrish Rau, CEO of PayU, said: "RBI has tinkered with Debit charges again. Capping of Bank Interchange fees will provide big boost to digital payments".

Debit card usage volume has tripled to 2.4 billion transactions in 2016-17 from around 800 million in 2014-15.

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Each time a card is swiped, a vendor pays an tax to the bank. However, there is no RBI cap on MDR on credit card payments.

This amount is estimated to be Rs 4.37 lakh crore for the whole of the current financial year, he added. On the UPI, merchants are charged a merchant discount rate (MDR) of 0.25 percent for payments below Rs 1,000 and 0.65 percent for all other charges.

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