Cabinet approves subsidizing of MDR charges on transactions less than Rs.2000
The Union Cabinet on Friday decided to bear Merchant Discount Rate (MDR) applicable on all debit card/BHIM UPI/ AePS transactions up to and including a value of Rs. 2000 for two years with effect from 1 January, 2018. The government will reimburse the amount to the banks.
A Committee comprising of Secretary Department of Financial Services, Secretary Ministry of Electronics & I.T. 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.
As a result of this approval, for all transactions less than Rs. 2000 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. Since such transactions account for sizeable percentage of transaction volume, it will help to move towards a less cash economy.
It is estimated that the MDR to be reimbursed to the banks in respect of transactions less than Rs.2000 in value would be Rs.1,050 crore in FY 2018-19 and Rs.1,462 crore in FY 2019-20.
When payment is made at a merchant point of sale, MDR is payable by the merchant to the bank. Citing this, many people make cash payments inspite of having debit cards. Similarly, MDR is charged on payments made to merchants through BHIM UPI platform and AePS.
Also, following schemes and bills are approved by the cabinet.
- Continuation of NLCPR scheme for North East till March 2020
- Continuation of Centrally Sponsored Scheme of National Ayush Mission (NAM) from 01.04.2017 to 31.03.2020
- Signing of MoU between India and Colombia in the field of agriculture and fisheries
- Special package for employment generation in leather and footwear sector