RBI gives credit for debit card usage

RBI gives credit for debit card usage

RBI gives credit for debit card usage

"In recent times, debit card transactions at "Point of Sales" have shown significant growth and with a view to giving further fillip to acceptance of debit card payments for purchase of goods and services across a wider network of merchants, it has been made a decision to rationalise the framework for Merchant Discount Rate (MDR) applicable on debit card transactions based on the category of merchants", the regulator added in its statement.

Given the situation, MDR was a way to encourage the use of debit cards, especially at smaller merchants/service providers and also facilitate acceptance of small value transactions.

The Reserve Bank of India will rationalise the merchant discount rate on debit card transactions, the central bank said in a press release after the monetary policy committee review meeting on Wednesday.

For merchants whose annual turnover exceeds Rs 20 lakh, the MDR has been capped at 0.90% for swipe machine based transactions and 0.80% for QR code based sales, subject to a maximum of Rs 1000 per transaction. In both cases, Rs 200 has been set as the absolute cap. Merchant discount rate is the fee charged to a merchant by a bank for providing debit and credit card payment services.

For QR code-based card acceptance, merchant charge will not exceed 0.8 per cent of the transaction value with a cap of Rs 1,000.

RBI guided saying, "It is reiterated that the banks and authorised card payment networks shall strictly adhere to the above directions".

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Performance debit card transaction at point of sales (POS) terminal has seen major boost after the announcement of the demonetisation drive. However, that directive was applicable only until March 31, 2017. The data also showed that while 5450 million card transactions were undertaken at the end of 2017 its value stood at Rs 7421 billion.

Start of fiscal year FY18 has so far been modest for POS transactions.

Following the demonetisation drive past year, when currency of Rs 500 and Rs 1000 denomination was withdrawn from circulation, MDR was further reduced for transactions up to Rs 1000, to 0.25% of the transaction value.

The proposed structure is simpler than what RBI had suggested in a draft paper in February.

Before that MDR rate did not exceed 0.75 per cent of the transaction amount for a value up to Rs 2,000 and did not exceed 1 per cent for transaction amount for value above Rs 2,000.

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