Moneycontrol
Dec 06, 2017 02:48 PM IST | Source: Moneycontrol.com

Monetary Policy: Debit card transactions to get a boost as RBI caps Merchant Discount Rate

The revised MDR aims at achieving the twin objectives of increased usage of debit cards and ensuring sustainability of the business for the entities involved.

Beena Parmar @BeenaParmar

Debit card transactions will get a boost as the Reserve Bank of India will put a limit on merchant discount rate (MDR) and create a framework for asset-light acceptance infrastructure.

A differentiated MDR for asset-light acceptance infrastructure and a cap on absolute amount of MDR per transaction will be prescribed, RBI said after its monetary policy announcement on Wednesday.

The revised MDR aims at achieving the twin objectives of increased usage of debit cards and ensuring sustainability of the business for the entities involved. The revised instructions for MDR on debit card transactions will be issued later on Wednesday.

The government has been pushing to reduce the MDR as most merchants were avoiding using card-based payments due to the high costs involved.

In recent times, especially post demonetisation that took place on November 8 in 2016, debit card transactions at ‘Point of Sales’ have shown significant growth.

With a view to giving further fillip to acceptance of debit card payments for purchase of goods and services across a wider network of merchants, it has been decided to rationalise the framework for Merchant Discount Rate (MDR) applicable on debit card transactions based on the category of merchants, RBI said.

Earlier this year, RBI had proposed to drastically cut MDR charges on debit card payments with a view to maintaining the momentum of digital transactions post the note ban, especially among small merchants.
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