In order to promote digital payments, the Reserve Bank on Wednesday came out with differentiated merchant discount rates (MDR) for debit card transactions, prescribing separate caps for small and large traders.
MDR is the rate charged to a merchant by a bank for providing debit and credit card services.
According to the latest notification, MDR charges for small merchants with an annual turnover of up to Rs 20 lakh has been fixed at 0.40 per cent with a cap of Rs 200 per transaction by debit cards through Point of Sale (PoS) machines or online transactions.
For accepting payments via QR (quick response) code based transactions, the charge will be 0.30 per cent subject to a cap of Rs 200 per transaction.
In case the annual turnover of a merchant is over Rs 20 lakh, the MDR charges would be 0.90 per cent with a cap of Rs 1,000 per transaction. If transaction is through QR code, the charges will be 0.80 per cent with a similar cap.
These directions will come into effect from January 1, RBI said, adding it would be the duty of the banks to ensure the MDR levied on the merchant does not exceed the prescribed cap.
RBI said rationalisation of the charges is being undertaken with a view to achieve the twin objectives of promoting debit card acceptance by a wider set of merchants, especially small traders, and ensuring sustainability of the business for the entities involved.
Following demonetisation, the RBI had in December last year capped the MDR charges at 0.25 per cent for transactions up to Rs 1,000.
For transactions above Rs 1,000 and up to Rs 2,000, it was capped at 0.5 per cent of the transaction value.
Before that, the MDR was capped 0.75 per cent for transaction up to Rs 2,000 and not exceeding 1 per cent for payments above Rs 2,000.
Commenting on RBI's move, Ashwani Kumar, Chairman and Managing Director of Dena Bank, said introduction of differentiated MDR and a cap on the absolute amount is expected to increase acceptance of debit card usage and "will also bring down the cost of transactions for small merchants".