Government To Waive Fee For Cashless Transaction Up To Inr 2000
Government to waive the fee for cashless transaction up to INR 2000:
The Union Cabinet of the Government of India has decided to waive Merchant Discount Rate (MDR), applicable on all debit cards, BHIM, UPI, AePS transactions, up to and including a value of INR 2,000. In fact, the Government will reimburse this fee to the banks for a period of two years with effect from January 1, 2018. As these small value transactions account for a sizeable percentage of the overall digital transaction volume in the country, this move will be a one-step forward towards the cashless economy.
It may be noted that MDR is the fee paid by the merchant to the acquiring bank (that provides the PoS devices), and a part of this fee is shared by the cards issuing bank and payment solutions providers like VISA/Mastercard/Rupay. MDR is also charged on payments made to merchants through BHIM UPI and AePS.
Government while announcing the decision has said, “As a result of this approval, for all transactions less than INR 2,000 in value, the consumer and the merchant will not suffer any additional burden in the form of MDR thereby leading to greater adoption of digital payment modes for such transactions.” The statement by the Government also added “It is estimated that the MDR to be reimbursed to the banks in respect of transactions less than INR 2,000 in value would be Rs 1,050 crore in FY 2018-19 and INR 1,462 crore in FY 2019-20”.
Government to Waive Fee for Cashless Transaction up to INR 2000
A couple of days before, RBI decided to reduce the MDR from 1% to 0.9%, from January 1, to boost digital payments in the country. As per the earlier rules, MDR used to be levied in three slabs — for transactions below INR 1,000, the MDR was 0.25%; between INR 1,000 and INR 2,000, it was 0.5%; and for the transactions above INR 2,000 or more, it was 1%. After RBI’s new rules, transactions below INR 1,000 will have attracted an MDR of 0.4%, for transactions between INR 1,000 and INR 2,000, it was increased to 0.9% and for transactions above INR 2,000, it was reduced from 1% to 0.9%.
nMerchants’ contention was that MDR rates have been increased in the up to INR 2,000 transaction slab, where about 70% percent of the transactions occur for any retailer.
IT and Law minister Ravi Shankar Prasad said, "For all the transactions less than INR 2,000 in value, the consumer and the merchant will not suffer any additional burden in the form of MDR”. The minister mentioning the steps being taken by the Government to look into the issue holistically, also said “A committee comprising Secretary, Department of Financial Services, Secretary, Ministry of Electronics & IT, and the CEO, National Payment Corporation of India (NPCI), will look into the industry cost structure of such transactions which will form the basis to determine the levels of reimbursement”.
In another recent development, in response to the campaigns by retailers who want the MDR to be abolished, RBI, while categorically rejecting this demand has said, “The rate cannot be nil because no bank will then have the incentive to invest.”