JOIN USThe cost of digital transactions may come down soon, as the RBI is working to fix Merchant Discount Rate or MDR on debit card payment above Rs 2,000, Finance Minister Arun Jaitley told the Rajya Sabha.
“The RBI is deciding on this. It is work in progress. I am sure as volumes (of digital transactions) are increasing, the charges will come down,” Jaitley said during the Question Hour.
Jaitley said that under the Payments and Settlements Act, the RBI has held that for cash transactions up to Rs 1,000, the MDR rate would be 0.25% while for transactions up to Rs 2,000 it has been fixed at 0.50%.
He said that for transactions above Rs 2,000, the RBI is considering the rate to be applied.
Earlier, the RBI had decided to slash MDR charges on payments made through debit cards and do away with levies on small transactions through mobile phones and Internet from January 1 to March 31.
The MDR for debit card payments, including for payments made to the government, will be capped at 0.25% for transactions up to Rs 1,000 and 0.5% between Rs 1,000 and Rs 2,000, the RBI had said in a notification.
For digital payments, banks install payment infrastructure like POS (Point of Sale) machines with merchants and ask them to start a unique account called merchant account with banks to avail payments from their customers. As the banks provide payment services, the merchants have to pay a charge to lenders for using the payment infrastructure installed by them. This payment is called Merchant Discount Rate (MDR).