RBI proposes lower MDR from April 1 to keep digi-pay momentum

MDR to be on the merchant turnover basis, rather than the present transaction value-based slab-rate

The Reserve Bank of India (RBI) has proposed that the merchant discount rate (MDR or charge) on debit card transactions be rationalised on the basis of turnover.

Transactions up to Rs 2,000 do not attract a charge but this is to end on March 31.

The central bank issued draft guidelines on its website that propose the MDR be “on the basis of merchant turnover, rather than the present slab-rate based on transaction value”.

Besides, there should be differentiated MDR for the government and QR-code related transactions. Also, “there is a need to differentiate MDR between acquiring infrastructure involving physical terminals, including mobile point-of-sale, or mPOS, and digital acceptance infrastructure models such as QR code”.

RBI proposes that where a merchant is willing to pay upfront for the card acceptance infrastructure, the MDR has to be on the lower side. 

The draft proposes different categories of merchants, based on the categories proposed in the coming goods and services tax (GST). For example, a merchant with yearly turnover below Rs 20 lakh could be termed small. Other categories such as government transactions, special categories of merchants and all other categories with turnover within the ambit of GST (turnover above Rs 20 lakh yearly) should be created.

For small merchants, MDR should be not more than 0.4 per cent with physical point-of-sales infrastructure and 0.3 per cent for digital transactions. The same limit for special categories of merchants such as utilities, hospitals or toll collection points.  

For large merchants, the MDR could be as much as 0.95 per cent of the transaction amount. For government transactions, 0.5 per cent of those above Rs 2,000, with a cap of Rs 250. For transactions below Rs 2,000, a flat charge up to Rs 10.