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Friday, December 15, 2017

NDA Govt at the Centre to bear MDR on small digital transactions for two years

In a major push towards making India a less-cash economy, the union cabinet on Friday Dec 15,2017 decided to bear the merchant discount rate (MDR) applicable on digital payments via debit cards, etc., up to Rs2,000.

The MDR applicable on transactions made through debit cards, the unified payments interface (UPI) and Aadhaar-enabled payments system (AEPS) up to and including a value of Rs2,000 will be borne by the government for a period of two years with effect from January 01,2018, said Ravi Shankar Prasad, information technology and law minister, while announcing the cabinet decision.

 For merchants whose annual turnover exceeds Rs20 lakh, MDR has been capped at 0.9% for swipe machine-based transactions and 0.8% for QR code-based sales, subject to a maximum of Rs1,000 per transaction.

MDR is the charge paid by a merchant to a bank for accepting payment from customers via credit or debit cards. It is expressed as a percentage of the transaction amount.

It is estimated that the MDR to be reimbursed to banks in respect of transactions less than Rs2,000 in value will be Rs1,050 crore in FY 2018-19 and Rs1,462 crore in FY 2019-20, a government statement said.

“As a result of this approval, for all transactions less than Rs2,000 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,” the statement added.

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