Soon, the small merchant near you will happily facilitate a debit card transaction as the RBI has rationalised the Merchant Discount Rates based on the turnover of the merchant instead of value of the transaction. The lower rate for the smaller merchants will make them push digital transactions.
Merchants with a turnover of up to Rs 20 lakh in the previous financial year will be charged an MDR of up to 0.40 per cent of the transaction with a cap of Rs 200. This will be applicable for all physical Point of Sales and online transactions. For the QR-code based transactions, the merchant can be charged up to 0.30 per cent of the transaction but the cap remains at Rs 200.
For merchants with above Rs 20 lakh turnover, the MDR can be up to 0.90 per cent of the transaction with a cap of Rs 1,000. For QR-code based transactions, the MDR should not exceed 0.80 per cent.
Till now, the MDR was based on transaction value, no matter what the turnover of the merchant was. As per existing guidelines for debit cards, MDR is capped at 0.25 per cent for transactions up to Rs 1,000 and at 0.5 per cent for transactions above Rs 1,000 and up to Rs 2,000. For transactions above Rs 2,000, the MDR is capped at one per cent.
“The new rates will provide a major fillip to digital transactions. Earlier, smaller merchants were hesitant to use the POS terminals as the rates were uniform for all. Lower rate will make them go for digital payments,” said a senior Federal Bank official. “Based on consultations with stakeholders on the ‘Draft Circular - Rationalisation of Merchant Discount Rate (MDR) for Debit Card Transactions’, as also taking into account the twin objectives of promoting debit card acceptance by a wider set of merchants, especially small merchants, and ensuring sustainability of the business for the entities involved, it has been decided to rationalise the MDR for debit cards,” RBI said.
The volume of card payments at point-of-sale terminals has grown over 100 per cent since 2012 and value of such payments has risen by 65.5 per cent during the same period.
"RBI’s twin initiatives on capping MDR on Debit Cards and a differentiated MDR for asset light acceptance are very welcome and will boost the use of debit cards and non-card instruments. This is consistent with the policy initiatives over the last few years starting with the issue of Debit Cards under PMJDY, last year’s drive to double the number of POS terminals deployed and this year’s push toward Bharat QR and BHIM UPI,” said Deepak Chandnani, managing director, Worldline South Asia and Middle East.
“We welcome the RBI’s move to encourage wider acceptance of debit card payments across the country. With over 800 million debit cards and over 40mn consumers already using mobile banking apps, almost every household in India now has access to a digital form of payment. The RBI’s new directive could further accelerate the proliferation of digital payments amongst consumers and encourage small merchants and retailers to provide digital payment options to their customers. It will catalyze the expansion of acceptance infrastructure and energise asset light methods of payments such as BharatQR.” said T.R. Ramachandran, group country manager, Visa, India and South Asia
“I hope that along with this, the RBI also mandates that the split of the MDR between the issuer and the acquirer is distributed more equitably so that the acquirers can make 25+ basis points on POS transactions and 15+ basis points on asset-light transactions. Without this the eco-system for electronic payments will not get built in a holistic and sustainable way. All the key players must see economic viability for e payments to achieve the goals we have as a nation and as an industry,” added Chandnani. The new rates will be effective from January 1.