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Friday, December 8, 2017

RBI caps charges on debit card transactions at merchant outlets


MUMBAI: The Reserve Bank of India has capped the fee on debit card transactions at merchant outlets as the regulator shows resolve to promote digital transactions which was coming under threat from high fees after a burst of growth post demonetisation. 

The banking regulator has split the amount of Merchant Discount Rate, the fee that shop keepers charge the customers, into two –for merchants with turn-over of less than Rs 20 lakh and the other for more than Rs 20 lakh. It has also suggested a different rate for the so called QR code based transactions and the point of sale transactions using the swipe machine. 

“We thought a further push to debit card usage is needed and we decided to rationalize MDR which is intended to widen the network of merchant establishments who use debit cards,” said B.P. Kanungo, Deputy Governor, RBI. “This new rule will leave money on the table for merchants so that they add more technology.” 

For merchants with higher turn-over Rs 1000 is the cap, and for low turn-over the maximum charge could be Rs 200. As per the new rules, small merchants will bear MDR of 0.40% for physical PoS and the fee will not exceed Rs 200 per transaction. While QR code-based payments will attract MDR of 0.30% with the maximum fee capped at Rs 200. For the larger merchants taking payments via physical PoS machine the new MDR is 0.90% with a maximum cap of Rs 1000 per transaction. Likewise the QR code-based payments will attract MDR of 0.80% with the maximum fee not exceeding Rs 1000. 

“The new MDR structure will help drive more digital payments,” said Sangram Singh, Head of cards and payments, Axis Bank. “Having a preferential rate for small merchants and QR code based payments will help expand the payments acceptance network further, especially in segments that have low penetration today.” 

The regulator has also said that the banks will have to ensure that the MDR levied on merchants should not exceed the cap rates and that the merchants on-boarded by banks do not pass on MDR charges to customers. The new rates will be effective January 1, 2018. 

“While there should not be any price regulation by the regulator, but the final guidelines are much clearer. Its benefits will trickle down to the lowest merchant category,’’ said Naveen Surya, Chairman, Payments Council Of India. “I don’t see any specific exemption given to the government transactions which is a positive move.” 

In December last year, the RBI had capped MDR rates to give a fillip to digital transactions post demonetization. MDR was capped at 0.25% for transactions up to Rs 1,000 and at 0.5% for transactions above Rs 1,000 and up to Rs 2,000. For transactions above Rs 2000, the MDR was capped at 1%. In June 2012, the RBI decided to cap the MDR at 0.75% for a transaction value of up to Rs 2000 and 1% for payments above that. 

Data with RBI shows that volume of card payments at point-of-sale (PoS) terminals has grown over 100% since 2012 and value of such payments have risen by 65.5% during the same period. The data also showed that while 545 crore card transactions were undertaken at the end of 2017 its value stood at Rs 742 crore.

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