Centre to absorb MDR on debit card payments of up to Rs 1 lakh to govt

The Centre recently waived service charges on card payments of up to Rs 2,000

In a bid to encourage digital transactions, the finance ministry will absorb the merchant discount rate (MDR) for payments of up to Rs 1 lakh made to the government through debit cards.

The Centre will make a budgetary provision for reimbursement of MDR charges to banks on taxes and other government receipts paid via debit cards.

"Budget Division will make the necessary budget provision under relevant head of Account in the Demand for Grants of the Department of Economic Affairs...for payment of MDR charges, as applicable, in respect of all receipt transactions of government...," the ministry said in a circular.

The collecting banks receiving Government of India dues, such as tax revenue and other receipts, through debit cards would submit the claims of MDR charges to RBI periodically.

The Reserve Bank of India will reimburse banks' claims of Merchant Discount Rate (MDR) charges on government receipt transactions through credit to the bank and debit the government according to the budget provision.

After scrapping old higher denomination currency notes, the government recently waived service charges on card payments of up to Rs 2,000.

Besides, discounts have been offered for buying diesel and petrol through cards and also on insurance products.