RBI caps MDR to boost debit card transactions

In a bid to encourage electronic payments, the Reserve Bank of India (RBI) has decided to cap the Merchant Discount Rate (MDR) applicable on transactions conducted via debit cards from January 1, 2018.

The cap on MDR for debit card transactions has been based on two newly created categories -- small merchants with turnover up to Rs 20 lakh and other merchants with turnover above Rs 20 lakh -- RBI said.

According to the country's central bank, cap on "POS" (Point of Sales) has been kept at Rs 1,000 per transaction or 0.90 per cent of the transaction value for "other merchants", while that of Rs 200 or 0.40 per cent has been set for "small merchants".The MDR for QR code-based transaction has been capped at Rs 200 or 0.30 per cent for "small marchants" and Rs 1,000 or 0.80 per cent for "other merchants".

"In recent times, debit card transactions at 'POS' 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 MDR applicable on debit card transactions based on the category of merchants," the RBI said in a statement post its fifth monetary policy review.

The country's central bank added that 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.