The government has decided to bear the Merchant Discount Rate (MDR) charges on transactions up to 2,000 rupees made through debit cards, BHIM UPI or Aadhaar-enabled payment systems to promote digital transactions.
The decision was taken at a Union Cabinet meeting chaired by Prime Minister Narenda Modi. Briefing reporters after the meeting, Minister of Electronics and IT Ravi Shanakr Prasad said, MDR will be borne by the government for two years with effect from 1st of January, 2018 by reimbursing the same to the banks.
He said, as a result of this approval, the consumer and the merchant will not suffer any additional burden and lead to greater adoption of digital payment modes for such transactions. Mr Prasad said, since such transactions account for sizeable percentage of transaction volume, it will help move towards a less cash economy.
A committee comprising Secretaries, Department of Financial Services, and Ministry of Electronics and IT, and the CEO, National Payment Corporation of India will look into the industry cost structure of such transactions.It is estimated that the MDR to be reimbursed would be 1,050 crore rupees in 2018-19 and 1,462 crore rupees in 2019-20.