New Delhi: To encourage widespread usage of digital payments, the government on Friday said no Merchant Discount Rate (MDR) charges will be levied on debit card transactions of up to Rs 2,000.


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Merchant Discount Rate (MDR) applicable on all debit card/BHIM UPI/ AePS transactions up to and including a value of Rs 2000 will be be borne by government for 2 years with effect from 1 January, 2018 by reimbursing same to the banks, decides Union Cabinet on Friday.



MDR is the rate charged to a merchant by a bank for providing debit and credit card services.


In order to promote digital payments, the Reserve Bank has earlier come out with differentiated merchant discount rates (MDR) for debit card transactions, prescribing separate caps for small and large traders.


As per the latest notification, MDR charges for small merchants with an annual turnover of up to Rs 20 lakh has been fixed at 0.40 per cent with a cap of Rs 200 per transaction by debit cards through Point of Sale (PoS) machines or online transactions.


For accepting payments via QR (quick response) code based transactions, the charge will be 0.30 per cent subject to a cap of Rs 200 per transaction.


In case the annual turnover of a merchant is over Rs 20 lakh, the MDR charges would be 0.90 per cent with a cap of Rs 1,000 per transaction. If transaction is through QR code, the charges will be 0.80 per cent with a similar cap.


These directions will come into effect from January 1, RBI said, adding it would be the duty of the banks to ensure the MDR levied on the merchant does not exceed the prescribed cap.