In a bid to incentivise digital transactions and use of RuPay debit cards, National Payments Corporation of India (NPCI) has reduced the merchant discount rate (MDR) on cards at the point of sale,ecommerce and BharatQR- based transactions.
MDR is the rate charged to a business for processing a card-based transaction, levied by payment systems and banks.
The new MDR at 0.60% for transactions above Rs 2,000 will come into effect on October 20 and is capped at a maximum of Rs 150 per transaction.
The earlier charge was 0.90% with a higher cap of Rs 1,000 per transaction.
The MDR for card-based QR transactions has been reduced to 0.50% with a cap of Rs 150 per transaction.
“Significant reduction in MDR will encourage the use of debit cards. With the reduction and capping of MDR, merchants will now be encouraged to accept debit cards, which up till now they were averse due to higher MDR structure,” said Dilip Asbe, CEO, NPCI.
This follows the recommendations of the committee on digital payment ecosystem headed by Nandan Nilekani, which had suggested setting up a standing committee selected by RBI to periodically revise MDR.
NPCI is the umbrella body for all retail payments and settlement systems in India and launched the domestic card RuPay in 2012 apart from developing other products such as united payments interface (UPI).
As part of her maiden budget in July, finance minister Nirmala Sitharaman had proposed that MDR on digital payments be made zero to encourage digital payments. The fintech industry and digital payments companies had said that such a move will adversely impact innovation in the space.