Drive towards Cashless Economy by Reducing MDR charges

Good news for credit card and debit card users is that the government have subsidized and all MDR charges below Rs 2000 will be bourne by the Government. The Merchant Discount Rate (MDR) applicable on all debit card/BHIM UPI/ Aadhaar enabled Payment System (AePS) transactions upto and including a value of Rs. 2000 will be borne by the Government for a period of two years with effect from 1st January, 2018 by reimbursing the same to the banks.

By deploying this subsidy, will encourage card users as the cosumer and the merchant will not have any extra trasaction financial overhead cost that is either bourned by the buyer or the seller. This is also is a drive towards cashless economy, though is a long journey but certainly will provide motivation and higher usage of cards.

It is estimated that the MDR to be reimbursed to the banks in respect of transactions less than Rs.2000 in value would be Rs.1,050 crore in FY 2018-19 and Rs.1,462 crore in FY 2019-20.

When payment is made at a merchant point of sale, MDR is payable by the merchant to the bank. Citing this, many people make cash payments inspite of having debit cards. Similarly, MDR is charged on payments made to merchants through BHIM UPI platform and AePS.