Centre soon to discuss MDR rate issue with RBI: Finance Ministry official

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RBIThe Central Government will soon hold consultations with the Reserve Bank of India (RBI) to chalk out a mechanism for slashing the merchant discount rates (MDR).

Reportedly, the MDR has inflated to 0.90 per cent recently from the earlier transaction value of 0.25 per cent.

According to a senior official from the Ministry of Finance, MDR is an important issue as its rise would have a positive impact on Digital India Campaign; therefore a discussion on the same is pivotal.

“Most merchants will be discouraged to use POS machines, especially small merchants who do not get input tax credit in GST. This will discourage them from using POS machines,” the official said.

MDR is a rate levied on a merchant by a bank for issuing debit and credit card services.

As per the official data, nearly 27-28 crore transactions per month are reported on Point of Sale (POS) machines with an average size of Rs 1,500.

Post demonetisation, RBI capped the MDR at 0.25 per cent of the transaction value for transactions of up to Rs 1,000 and 0.5 per cent for those above Rs 1,000 and up to Rs 2,000.

The central bank recently announced the MDR charges at 0.40 per cent if the transaction comprises physical infrastructure namely swipe machine for small merchants with a turnover of up to Rs 20 lakh during the previous financial year.

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