Rationalisation of MDR on Debit Card Transactions
Rationalisation of MDR on Debit Card Transactions

The Reserve Bank of India (RBI) today said that it has decided to rationalise the MDR (Merchant Discount Rate) for debit card transactions with a view to give further fillip to digital payment. The main objective is to promote debit card acceptance by wider set of merchants, especially small merchants and ensuring sustainability of the business for the entitites involved.

Rationalisation of Merchant Discount Rate (MDR)

Payment by Debit card at point of sales has shown significant growth in recent times. With a view to promote acceptance of debit card payments for purchase of goods and services across a wider network of merchants, RBI has decided to rationalise the framework for Merchant Discount Rate (MDR) applicable on debit card transactions based on the category of merchants.

A differentiated MDR for asset-light acceptance infrastructure and a cap on absolute amount of MDR per transaction will also be prescribed.

What is Merchant Discount Rate (MDR)

MDR is a charge to a merchant by a bank for accepting payment from their customers through debit / credit card.

Earlier, MDR was charged some percentage amount of transaction.

Criteria for Rationalisation of MDR :

RBI has decided to rationalise the MDR for debit cards based on following criteria :

  • Categorisation of merchants on basis of turnover
  • Adoption of a differentiated MDR for QR code based transactions.
  • Specifying a ceiling on the maximum permissible MDR for both ‘card present’ and ‘card not present’ transactions.

Revised Mercahant Discount Rates (MDR) W.E.F JAN1,2018

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 ₹ 1000 per transaction)
Not exceeding 0.80%
(MDR cap of ₹ 1000 per transaction)

 

  • Banks shall ensure that 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.
  • Bank are also advised to ensure that merchants on boarded by them do not pass on MDR charges to customers while accepting payments through debit cards.
  • The above instructions shall be effective from January 1, 2018.  These instructions are subject to review.

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