Govt may reduce MDR rates significantly: Kant

Govt may reduce MDR rates significantly: Kant

 The government may reduce merchant discount rates (MDR) for debit card payments significantly as it is examining RBI suggestions for lesser rates to maintain the momentum of digital transactions post note ban, Niti Aayog CEO Amitabh Kant said on Tuesday.

MDR is a charge that merchants pay to banks, which issue Point of Sale machines.
The Reserve Bank of India had last week brought out a discussion paper on MDR transactions, wherein it had proposed to drastically cut MDR charges on debit card payments from April 1, specially for small merchants.

“Still there are challenges in digital payments. One of the challenges is to see that MDR rate comes down,” Kant told reporters here.

The RBI had proposed MDR charge at 0.40% of the transaction value for merchants with annual turnover of Rs 20 lakh and special category merchants, like utilities, insurance, mutual funds, educational institutions and government hospitals.

It had proposed an even less 0.3% MDR if the transaction is done through digital Point of Sale machines.

The existing MDR is capped at 0.75% for transactions up to Rs 2,000, and 1% for transactions over Rs 2,000.

Kant said banks are making largescale procurement of PoS machines, and in the past two-and-a-half months, the number of PoS machines has gone up to 28 lakh from the earlier 8-9 lakh. Incidentally, a week ahead of the Budget, a committee headed by Andhra Pradesh Chief Minister N Chandrababu Naidu had suggested abolishing MDR for digital payments made to government entities.

Meanwhile, initiative to make digital payments a mass movement through the two schemes — Digi Grahak Yojana and Digi Dhan Vyapar Yojana — has made headway. According to the latest figures released by the National Payments Corporation of India (NPCI), which has been executing the schemes, nearly 10 lakh consumers and merchants have been disbursed over Rs 153.5 crore as reward money till February 20.

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