Budget 2020: Debit cards to get cheaper; after Rupay and UPI, govt may now remove MDR charges on debit card

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January 29, 2020 7:03 PM

Union Budget 2020 India: In a bid to promote digital transactions, the government may exempt merchants from paying merchant discount rate (MDR) cost for payments made through debit cards, CNBC Awaaz reported citing sources.

RBI Credit card debit card rules 2020Budget 2020 India: MDR is the cost that a merchant pays to a bank in order to accept payment from their customers via digital means.

Budget 2020-21: In a bid to promote digital transactions, the government may exempt merchants from paying merchant discount rate (MDR) cost for payments made through debit cards, CNBC Awaaz reported citing sources. According to the report, the announcement is likely to be made in the upcoming budget presented by the Finance Minister Nirmala Sitharaman on February 1. In December 2019, the government had announced that the MDR charges will not be applicable on transactions made through RuPay and Unified Payments Interface (UPI) platforms. The charges for these two modes of payments were removed from January 1, 2020. For now, MasterCard and Visa cards are permitted to charge MDR.

Also Read: UPI, RuPay: Banks seek funds in lieu of zero MDR

MDR is the cost that a merchant pays to a bank in order to accept payment from their customers via digital means. The merchant discount rate is expressed in percentage of the transaction amount. In the budget presented last year, Nirmala Sitharaman had proposed that “businesses should offer low-cost digital modes of payment such as BHIM UPI, UPI QR Code, Aadhaar Pay, Debit Cards, NEFT, RTGS etc. to their customers, and no charge or MDR shall be imposed on customers to promote digital payment.” According to her statement, all companies with a turnover of Rs more than 50 crore will have to provide the payment facility through RuPay Debit card and UPI QR code to their customers, as mandated by Department of Revenue (DoR).

Watch Video: What is Union Budget of India?

However, this move is expected to result in an annual loss of Rs 5,000 crore as the costs related to the process would need to be incurred, Financial Express had earlier reported. As a result, banks have asked the government to support with funds in order to maintain the ecosystem now that they cannot charge merchants a fee. Indian Banks Association (IBA) had earlier sought an acceptance development fund (ADF) managed by the central bank.

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