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RBI to issue final guidelines on MDR charges

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Aimed at encouraging digital transactions, the Reserve Bank of India (RBI) said it would soon come out with final guidelines on merchant discount rate (MDR) charges on debit card payments.
Pending the final guidelines, the existing norms for MDR charges would continue beyond March 31, RBI Governor Urjit Patel said while announcing the first bimonthly monetary policy for 2017- 18. According to the existing guidelines, MDR for debit card payments, including for payments made to the government, is capped at 0.25 per cent for transactions up to Rs 1,000 and 0.5 per cent for amounts between Rs 1,000 and Rs 2,000.
The existing MDR cap is 0.75 per cent for transactions up to Rs 2,000 and one per cent for those over Rs 2,000. However, there is no RBI cap on MDR on credit card payments.
RBI issued a draft circular on Rationalisation of Merchant Discount Rate (MDR) for Debit Card Transactions´ on February 16. “The extensive feedback received, including from the government, banks, card networks, the Indian Banks Association, the Payments Council of India, private entities and individuals are being examined.
Until the issuance of final guidelines, the extant instructions on MDR for debit card transactions will continue to apply,” he said.
The policy did not spell out the timeline by when the final guidelines on rationalisation of MDR charges would be announced.
According to the draft guidelines in February, the MDR charge has been proposed at 0.4 per cent of the transaction value for small merchants with an annual turnover of Rs 20 lakh and special category merchants, such as utilities, insurance, mutual funds, educational institutions and government hospitals.
The MDR charge levied on debit card transactions would be even less at 0.3 per cent if the transaction is throughadigital point of sale (QR code), it had said.
The draft also proposes banks will ensure all merchants display the signage ´No convenience or service charge is payable by customers´.
The Business Standard New Delhi, 07th April 2017

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