The Reserve Bank of India on Friday decided to slash Merchant Discount Rate (MDR) charges on payments made through debit cards. For transactions of up to Rs 1,000, MDR will be capped at 0.25% of the transaction value. For transactions above Rs 1000, and up to Rs 2000, MDR will be capped at 0.5% of the transaction value.
Earlier, debit card transactions were 0.75% of the transaction value up to Rs 2000 and 1% for transaction amount above Rs 2000. However, there is no RBI cap on MDR on credit card payments. Also, the new charges will not apply to ATM transactions.
RBI said reduced charges will come into effect from January 1, 2017 and shall be applicable till March 31, 2017. Post demonetisation, several banks including SBI, ICICI Bank, Axis Bank and Yes Bank had waived MDR charges on debit card transactions till December 31.
The relaxations, RBI said is in tandem with initiatives taken by the government to ‘incentivise greater adoption of digital payments by large sections of the society.’
Merchant discount rate is the rate charged to a merchant by a bank for providing debit and credit card services. The rate is determined based on factors such as volume, average ticket price, risk and industry.
As of October 2015, there were 61.5 crore debit card users and 2.3 crore credit card holders in the country.