RBI to reimburse banks’ MDR charges on debit card transactions

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Mumbai | Published: February 17, 2017 6:40:05 AM

The Reserve Bank of India (RBI) on Thursday said it will reimburse banks the merchant discount rate (MDR) charges in debit card transactions for tax and non-tax dues to the government with effect from January 1.

rbi-reu-1-1-1“The government has decided to absorb the Merchant Discount Rate (MDR) charges in respect of debit card transactions while making payments to GoI,” the RBI notification said. (Reuters)

The Reserve Bank of India (RBI) on Thursday said it will reimburse banks the merchant discount rate (MDR) charges in debit card transactions for tax and non-tax dues to the government with effect from January 1. A senior banker at a large public sector bank said that at present the number of debit card transactions for payment of government dues is minuscule as very few have point-of-sale (PoS) terminals.

“The government has decided to absorb the Merchant Discount Rate (MDR) charges in respect of debit card transactions while making payments to GoI,” the RBI notification said. It also advised agency banks to forward their claims for reimbursement along with auditor’s certificate on a quarterly basis to RBI’s central account section in Nagpur.

“The claims may be signed by the officer-in-charge of the government banking division of the bank, and should also certify that MDR charges for transaction amounts up to R1 lakh have not been collected from the payer. The first such claim may be made by April 30, 2017 for the quarter ending March 31, 2017,” the RBI note added.
According to the banker, lenders had sought clarification from the RBI if MDR charges on debit card transactions at Indian Railways ticket booking counters would be reimbursed. “We have not yet heard from the central bank on that,” he said.

Post-demonetisation, the government had asked lenders to waive MDR charges on debit card payments until December 31 to encourage customers to use digital payment services. In January, a committee of chief ministers led by N Chandrababu Naidu had suggested abolishing the MDR for some categories of digital payments. The new MDR rule is primarily to encourage people to migrate towards digital transactions and pushing forward Prime Minister Narendra Modi’s idea of a cashless society.

According to RBI data, the total number of debit card transactions at PoS terminals in December 2016 stood at 321.54 million of R43,874 crore. The value of PoS transactions fell 25% in January from their peak in December, mostly due to the gradual easing of limits on cash withdrawals, starting January, representative data from the RBI showed.

In a bid to push debit card transactions, the RBI on December 16 had capped the MDR on transactions of up to R1,000 at 0.25% and for those between R1,000 and R2,000 at 0.5%.

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