04 Jan 2018Posted By: Pooja

No MDR Charges on Debit Card Transaction below Rs 2000

Starting from 1st of January 2018 customers will not be charged any kind of transaction charges for payments made through their debit card, BHIM app or any other payment options for transactions up to Rs 2,000. In order to give a push to Digital transactions in India, Union Cabinet approved the proposal that government will bear the merchant discount rate (MDR) charges for transactions up to Rs 2,000 made through customers debit card, BHIM UPI or any Aadhaar-enabled payments systems.

What is MDR?
Merchant discount rate is a fee charged to a merchant by a bank for providing debit or credit card payment services.

Now from 1st of January 2018, MDR will be borne by the central government for about two years by reimbursing those charges to banks. The decision is expected to have an impact of about Rs 2,512 crore on national treasure which was taken at the Cabinet meeting chaired by Hon. Prime Minister Narendra Modi.

Last month RBI has decided to rationalize the framework for MDR applicable on debit card transactions based on the category of merchants.
RBI had said about small merchants having a turnover of less than Rs 20 lakh in the previous financial year can’t be charged more than 0.4 percent per debit card and MDR paid to the bank cannot be exceeded to Rs 200.

Now on the other side merchants having a turnover of about Rs 20 lakh or above during last financial year cannot charge more than 0.9 percent per debit card and MDR paid to a bank cannot exceed Rs 1,000.

Ultimately this decision will help customers getting their charges waived off for transactions up to Rs 2000 on payments via Debit card, BHIM App or any other Aadhaar enabled payment system.

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