Banks may shift from the present slab-rate Merchant Discount Rate (MDR) based on transaction value to merchant turnover based MDR structure, for which merchants have been suitably categorised, going by Reserve Bank of India's draft circular on MDRs.

Further, a differential MDR structure for asset light card acceptance infrastructure like QR Code, special merchant categories for government transactions and other transactions involving non-discretionary expenses have also been proposed.

This proposed move on MDR is aimed at encouraging a wider segment of merchants to accept card payments.

MDR is the fee charged by the acquirer (the bank providing infrastructure to the merchant to accept payment and facilitate acceptance payments via cards) to the merchant.

In the case of small and special category merchants, according to the RBI, the MDR for debit card transactions should not exceed 0.40 per cent of the transaction value at physical POS and 0.30 per cent at digital POS.

In the case of all other merchants (other than government), the MDR is pegged at 0.95 per cent and 0.85 per cent for debit card transactions at physical POS and digital POS, respectively.

In the case of government transactions, at both physical and digital POS, the MDR would be a flat free of Rs 5 for transaction value Rs 1 to Rs 1000; Rs 10 for transaction value Rs 1001 to Rs 2000; and not exceeding 0.50 per cent for transaction value above Rs 2001 with cap of Rs 250 per transaction.