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RBI reduces MDR for small merchants
Posted on: 07/Dec/2017 12:19:30 PM
For small merchants i.e., for businesses that make turnover of lesser than Rs 20 lakh, the RBI has reduced the merchant discount rate. MDR is the fees that the merchants pay to the bank for each and every card payment done.
At the time of demonetization, a progressive charge structure was introduced. This is now wiped away under this new regime. Merchants had to pay higher value transaction, according to the progressive structure. This will have to be paid regardless of the scale of business.
The new regime
According to the new dispensation, it is mandatory to pay only 0.40 percent of the transaction value for merchants who have the previous year turnover lesser than Rs 20 lakh. Further, the maximum fee amount is limited to Rs 200. It can rather be said that for all kinds of debit card payments done above Rs 50,000, a flat fee of Rs 200 will be applicable.
In case of larger retailers like those who make more than Rs 20 lakh, there will be double the charge i.e. 90 percent of the total transaction value. Rs 1000 is the cap fixed as maximum fee for large businesses.
This new initiative has excited all debit card issuing banks. There were complaints earlier that they were subsidizing big retail including the luxury chains that mostly received card payments. There were lower MDR in case if customers made card payments with app by scanning the merchant’s QR code.
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