Merchant Discount Rates to impact Digital India, government in talks with RBI
, ET Bureau|
Updated: Dec 13, 2017, 09.34 PM IST
The government will soon hold discussions with the Reserve Bank of India (RBI) to bring down the revised merchant discount rates (MDR), which are set to be implemented from
January 1, 2018
.
A senior finance ministry official confirmed the development and said that the rationalisation of charges will impact the government's digitisation strategy, given there is a steep increase in MDR from 0.25% to 0.90%.
"Most merchants will be discouraged to use POS machines, which will severely impact the government's strategy towards promoting payments through digital mode," he said.
Last year after demonetisation, RBI as a special measure had capped the MDR at 0.25% of the transaction value for transaction up to Rs 1,000 and 0.5% for transactions above Rs 1000 and up to Rs 2000.
"The relaxed norms had helped and more merchants adapt to POS machines and the number of transactions had doubled to around 340 crore," the official said adding that there are around 27-28 crore transactions that are held per month on the POS machines with an average size of Rs 1,500.
"We don't want to squander these gains and there are very few merchants with an annual turnover of Rs 20 lakh who use POS machines, even for them the cost goes high," said another official aware of the deliberations.
The new norms announced by RBI a week ago, puts the MDR charges at 0.40% for small merchants with turnover upto Rs 20 lakh during the previous financial year, the MDR charges are capped at 0.90% for other merchants limited to Rs 1,000 per transaction.
The government is pushing its financial institutions to promote digitisation. Last month, finance minister Arun Jaitley had said that digital transaction is fast taking the place of cash being a predominant instrument for transactions with a series of government initiatives to formalise the economy.
"Several policy initiatives that the government took one after the other have set off a chain reaction and that chain reaction is visible in various ways,"he had noted.
Eralier, The Retailers' Association of India (RAI) has also raised this issue with the government and the regulator. They have demanded that the MDR charge should be kept at 0.40% and that the revised charges will increase the cost of merchants which they will have to pass on to the consumers.
A senior finance ministry official confirmed the development and said that the rationalisation of charges will impact the government's digitisation strategy, given there is a steep increase in MDR from 0.25% to 0.90%.
"Most merchants will be discouraged to use POS machines, which will severely impact the government's strategy towards promoting payments through digital mode," he said.
Last year after demonetisation, RBI as a special measure had capped the MDR at 0.25% of the transaction value for transaction up to Rs 1,000 and 0.5% for transactions above Rs 1000 and up to Rs 2000.
"The relaxed norms had helped and more merchants adapt to POS machines and the number of transactions had doubled to around 340 crore," the official said adding that there are around 27-28 crore transactions that are held per month on the POS machines with an average size of Rs 1,500.
"We don't want to squander these gains and there are very few merchants with an annual turnover of Rs 20 lakh who use POS machines, even for them the cost goes high," said another official aware of the deliberations.
The new norms announced by RBI a week ago, puts the MDR charges at 0.40% for small merchants with turnover upto Rs 20 lakh during the previous financial year, the MDR charges are capped at 0.90% for other merchants limited to Rs 1,000 per transaction.
The government is pushing its financial institutions to promote digitisation. Last month, finance minister Arun Jaitley had said that digital transaction is fast taking the place of cash being a predominant instrument for transactions with a series of government initiatives to formalise the economy.
"Several policy initiatives that the government took one after the other have set off a chain reaction and that chain reaction is visible in various ways,"he had noted.
Eralier, The Retailers' Association of India (RAI) has also raised this issue with the government and the regulator. They have demanded that the MDR charge should be kept at 0.40% and that the revised charges will increase the cost of merchants which they will have to pass on to the consumers.
