RBI changes MDR for debit card payments, widens ambit to include small merchants; here are new rates


Mumbai: In order to boost non-cash transactions which were stagnant for some time after new notes returned to banks, the Reserve Bank of India rationalised the merchant discount rate (MDR) on Wednesday. The central bank has tweaked the fee levels to widen the network of merchant establishments which will accept card payments. The move also aims to incentivise banks to invest more into cash-less or less-cash payment systems.

Representational image. Reuters.

The RBI said in a statement said, “Based on consultations with stakeholders on the ‘Draft Circular – Rationalisation of Merchant Discount Rate (MDR) for Debit Card Transactions’, as also taking into account the twin objective of promoting debit card acceptance by a wider set of merchants, especially small ones, and ensuring sustainability of the business for the entities involved, it has been decided to rationalise the MDR for debit cards based on the following criteria:

1) Categorisation of merchants on the basis of turnover.

2) Adoption a differentiated MDR for QR-code based transactions.

3) Specifying a ceiling on the maximum permissible MDR for both ‘card present’ and ‘card not present’ transactions.”

Here are the new MDR rates which will come into effect from 1 January 2018. 


 The maximum MDR for debit card transactions shall be as under
Sr. No Merchant category Merchant Discount Rate (MDR) for debit card transactions (as a % of transaction value)
Physical POS infrastructure including online card transactions QR code-based card acceptance infrastructure
1 Small merchants (with turnover upto ₹ 20 lakh during the previous financial year) Not exceeding 0.40% (MDR cap of ₹ 200 per transaction) Not exceeding 0.30% (MDR cap of ₹ 200 per transaction)
2 Other merchants (with turnover above ₹ 20 lakh during the previous financial year) Not exceeding 0.90% (MDR cap of ₹ 1,000 per transaction) Not exceeding 0.80% (MDR cap of ₹ 1,000 per transaction)

Source: RBI

“It is reiterated that the banks and authorised card payment networks shall strictly adhere to the above directions. Further, banks shall ensure that the MDR levied on the merchant shall not exceed the cap rates as prescribed above, irrespective of the entity which is deploying the card acceptance infrastructure at the merchant location,” RBI statement said.

(With PTI inputs)

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