To get more merchants and consumers to chose digital payments over cash, the Union government said on Friday that it will bear the Merchant Discount Rate for debit card, BHIM, UPI and AePS transactions that are less than Rs 2,000. The government will cover the amount for two years starting January 1, 2018.
Banks charge merchants a Merchant Discount Rate in exchange for their debit and credit card services. The government said many consumers opt for cash payments even when they own a debit card because of this.
“For all transactions less than Rs 2,000 in value, the consumer and the merchant will not suffer any additional burden in the form of MDR, thereby leading to greater adoption of digital payment modes for such transactions,” a government statement said. The government said it will reimburse the banks for the waived amount, and estimated the cost to be R 1,050 crore in 2018-’19, and Rs 1,462 crore in 2019-’20.
Information and Technology and Law minister Ravi Shankar Prasad, while making the announcement, said digital transactions were on the rise in India. “The monetary value of digital transactions during the April-September quarter was worth Rs 2.18 lakh crores,” Prasad said, according to The Times of India.