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22
February 2017
The
government is looking to reduce Merchant Discount Rate (MDR) charges to
encourage digital payments, Niti Aayog Chief Executive Amitabh Kant said on
Tuesday.
"We
are pushing digital transactions. Our aim is to bring down MDR charges. Also,
if volume of transactions increase, MDR charges will come down," Kant told
reporters here while briefing about the Lucky Grahak Yojna (LGY) for consumers
and Digi-Dhan Vyapar Yojna (DVY) for merchants launched post demonetisation to
incentivise and promote digital payments.
"We
are examining RBI's draft circular on MDR. There are challenges to bring MDR
rates down... We will meet those challenges," he added, referring to the
Reserve Bank of India (RBI) circular last week on rationalisation of MDR for
debit card transactions. The Total
Investment & Insurance Solutions
Proposing
to cut MDR charges on debit card payments from April 1, the RBI proposed an MDR
charge on debit card transaction at 0.40 per cent of the transaction value for
small merchants with annual turnover of Rs 20 lakh and special category
merchants like utilities, insurance, mutual funds, educational institutions and
government hospitals. The Total
Investment & Insurance Solutions
The
central bank said MDR charges would be even less at 0.3 per cent if the
transaction is through digital mode using the QR Code. The Total Investment & Insurance Solutions
The
scrapping of high value currency notes of Rs 500 and Rs 1,000 on November 8
created an unprecedented crash crunch, with people across the country queuing
up outside banks and ATMs to withdraw money. The Total Investment & Insurance Solutions
Finance
Minister Arun Jaitley told Parliament earlier this month that the RBI is
working to reduce the MDR for debit card transactions above Rs 2,000. The Total Investment & Insurance
Solutions
"The
RBI is deciding on this...the work is in progress. I am sure as volumes (of
digital transactions) are increasing, the charges will come down," Jaitley
told the Rajya Sabha during Question Hour.
Jaitley
said that under the Payments and Settlements Act, the RBI has recently fixed
the MDR rate at 0.25 per cent for transactions up to Rs 1,000, while for
transactions up to Rs 2,000 it has been fixed at 0.50 per cent. The Total Investment & Insurance
Solutions
These
charges have been introduced for the period from January 1, 2017, and will be
applicable till March 31, 2017. The
Total Investment & Insurance Solutions
As per
the RBI's rate structure announced in 2012, the MDR for transactions valued
above Rs 2,000 has been capped at 1 per cent. The Total Investment & Insurance Solutions
The RBI
also announced last week that it will start reimbursing MDR charges to banks
for payments made through debit cards of tax and non-tax dues to the central
government since January 1.
The
Centre had, in December, decided to reimburse banks' MDR charges on taxes and
receipts paid through debit and credit cards.The Total Investment & Insurance Solutions
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