oppn parties Lower MDR to Push Digital Payments

News Snippets

  • T20 WC: USA enter Super Eights as their last match against Ireland gets washed out. They were ahead of Pakistan in the points tally. Pakistan were eliminated
  • T20 WC: USA enter Super Eights as their last match against Ireland gets washed out. They were ahead of Pakistan in the points tally. Pakistan were eliminated
  • BJD leader and former Odisha CM Naveen Patnaik said that the criticism of his aide V K Pandian is "regrettable"
  • As more than 20 BJP ministers lost in the recent elections, the new Union cabinet will have many new faces from the party
  • Congress Working committee asks Rahul Gandhi to take up the position of Leader of Opposition in Lok Sabha. Gandhi says he will consider the request
  • RBI governor Shaktikanta Das said that gold was shifted to India as the quantum of RBI gold abroad had increased due to recent purchases
  • Delhi HC rules that submitting photographic evidence of adultery will not be enough, they will have to be proved as authentic in the age of deepfakes
  • A four-member panel will review NEET-UG results of 1563 candidates to check if they were given extra marks for exam time loss
  • Mamata Banerjee says her party will not join Modi's oath-taking ceremony. Also says INDIA bloc might stake claim to form government later
  • K C Tyagi of the JD(U) dropped a bombshell when he said that Nitish Kumar was offered the post of prime minister for switching sides. Opposition leaders rubbished the claim
  • This May was India's hottest month in 36 years says IMD
  • T20 WC: India take on Pakistan today. Telecast to begin at 8pm IST
  • T20 WC: Afghanistan stun New Zealand and Bangladesh win against Sri Lanka
  • T20 World Cup: Australia beat England by 36 runs. This spoils England's chances of making the playoffs as they have lost both their matches till now
  • Heat wave continues in the country as monsoon moves slow
G7 commits to promote India-Europe corridor
oppn parties
Lower MDR to Push Digital Payments

By Yogendra
First publised on 2017-12-07 09:32:00

About the Author

Sunil Garodia Yogendra is freelance writer
The RBI has decided to cap the merchant discount rates (MDR) on all digital payments to encourage digital payments. MDR is the rate charged by banks from merchants for settling POS payments. While there was a spurt in such transactions post-demonetization, they have reached a plateau recently. The apex bank feels that since some banks charge a very high rate for digital payments, small merchants do not want to accept cards and QR based payments in their outlets as it puts pressure on profitability. Most retailers (except petrol pumps) do not charge anything extra to the end-consumer for making payments through cards.

The cap has been divided into four sections. The two broad differentials are one through POS machines and another through QR based apps. Under these broad categories, small merchants having a turnover of less than Rs 20 lakhs per annum will have a cap of 0.40% or a maximum of Rs 200 per transaction for POS and 0.30% and Rs 200 for QR apps. For larger merchants with turnover above Rs 20 lakhs, the cap is fixed at 0.80% or Rs 1000 per transaction for POS and 0.80% and Rs 1000 for QR apps.

This is a welcome change. Hitherto, banks used to charge a usurious 1.5% to 3% from small merchants, citing cost of maintaining POS, as their turnover was low. This was in addition to monthly rentals the merchants had to pay for deploying the terminal.This effectively meant that those merchants who worked on slim margins did not deploy POS terminals, losing out on customers. The other option the merchant had of charging this fee to customers is no longer open as people have become savvy enough to refuse paying any such additional charges for cashless payments. With MDRs capped, ideally small merchants should now install POS terminals and stop turning away customers. But there are other factors at play. Banks often charge a monthly fee from small merchants who have monthly transactions below a threshold. With MDR capped, banks will resort to hiking this monthly rental of POS. This will act as a dampener. That would amount to higher MDR by another name. RBI should also either do away with this rental or cap it at a reasonable amount if small merchants are to accept digital payments.