RBI lowers merchant commission rate on payments via debit card

As per the new RBI directive, the commission known as merchant discount rate (MDR), will not be more than 0.75 per cent of transactions of up to Rs 2,000.

For transactions above Rs 2,000, MDR has been capped at one per cent, as per the new rules that will be applicable from July 1.

In a statement, RBI said the MDR for debit and credit cards has been similar in India. While debit card is used as per the availability of funds, credit card usage is linked to the credit limit sanctioned by the issuer.

"Thus given the different nature of the two products, there is no rationale for having a similar MDR for debit and credit cards. Further, it is observed that debit cards are mostly being used for withdrawal of cash at ATMs," RBI said.

According to a public sector senior bank official, at present both debit and credit cards have the same MDR ranging between 2 per cent and 3 per cent.

RBI further said it was necessary to encourage the use of debit cards, especially at small merchants or service providers and location by way of lower MDR.

"This move would encourage all categories and types of merchants to deploy the card acceptance infrastructure and also facilitate acceptance of small value transactions," it said.

The MDR paid by customers for making payment through credit or debit card is shared between the merchant and the bank, the official said.

"The lowering of MDR for debit cards will encourage customers towards making most of their payments via debit card as they will now have to pay less commission", the bank official said.