Govt to bear transaction cost of payment via card

At present, customers bear transaction cost commonly known as merchant discount rate (MDR) on payments made to govt

The government has said it will bear the transaction cost for all payments made to it through debit or credit cards and net banking.

At present, customers bear the transaction cost, known as merchant discount rate (MDR), on payments made to the government.

"Government departments shall take appropriate steps to bear MDR like other merchants. The public shall not bear any MDR for making payment to government through debit cards or credit cards or digital means," said an office memorandum issued by the finance ministry.

It further said the methodology for reimbursement of such payments to intermediaries on transactions involving debit or credit cards or digital means was being worked out. Detailed guidelines and operational modalities would be issued in due course.

The finance ministry has issued the circular in pursuance of a decision of the government to promote credit and digital transactions in government payments and collections.

Earlier the government had set up a task force under department of investment and public asset management (Dipam) secretary Neeraj Kumar Gupta.

The task force on promotion of payments through cards and digital means has flagged issues with respective government departments.

The Reserve Bank or central bank in 2012 had capped the MDR for debit card transaction at 0.75 per cent for transaction values up to Rs 2,000 and at one per cent for transaction values above Rs 2,000. However, there is no Reserve Bank cap on MDR on credit card payments.

In order to move towards a "less-cash" society by developing a card acceptance infrastructure, Reserve Bank in March came out with a concept paper to encourage card transactions and sought public opinion.

As of October 2015, there were 615 million debit card users and 23 million credit card holders in the country.