Govt to absorb MDR charges on payment of taxes via cards

In a bid to encourage digital transactions, Finance Ministry has decided to make budgetary provision for reimbursement of MDR charges to banks on taxes and other government receipts paid via debit and credit cards.

"Budget Division will make the necessary budget provision under relevant head of Account in the Demand for Grants of the Department of Economic Affairs...for payment of MDR charges, as applicable, in respect of all receipt transactions of government...," the ministry said in a circular.

The collecting banks receiving Government of India dues, like tax revenue and other receipts through debit/credit cards would submit the claims of MDR charges to RBI periodically.

The Reserve Bank of India will reimburse banks' claims of Merchant Discount Rate (MDR) charges on government receipt transactions through credit to the bank and debit the government as per the budget provision.

After scrapping old higher denomination currency notes, the government recently waived service charges on card payments of up to Rs 2,000.

Besides, discounts have been offered for buying diesel and petrol through cards as also on insurance products.