Govt. to return MDR to banks to boost digital:

Govt. to return MDR to banks to boost digital:

Context

The Centre said it would reimburse the merchant discount rate (MDR) applicable on digital transactions up to ₹2,000 for the next two years to give a fillip to digital payments in the country.

To cover transactions of up to ₹2,000

  • This will be applicable on transactions done using debit cards, UPI BHIM application or Aadhaar.
  • The decision, cleared by the Cabinet, was expected to cost the exchequer more than ₹2,500 crore.

MDR

MDR is payable by the merchant to the bank when a payment is made at a merchant point of sale

Data

As per government’s estimates, the total MDR to be reimbursed to the banks in respect of transactions worth less than ₹2,000 in value would be ₹1,050 crore in FY 2018-19 and ₹1,462 crore in FY 2019-20.

High Volume

Digital transaction below ₹2,000 account for about 15-20% of the payments in terms of value. In volume terms, it was much higher.

The Committee

  • A Committee comprising Secretary, Department of Financial Services, Secretary Ministry of Electronics & IT and the CEO, National Payment Corporation of India (NPCI) will look into the industry’s cost structure of such transactions to determine reimbursement level.
  • The committee will also see that the scheme is not misused
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