High level of Merchant discount rate – often around 2 per cent in the past – had been one of the primary reasons why various merchants resisted in offering this option to their customers
To enhance the acceptability of Rupay debit cards, National Payments Corporation of India (NPCI) has reduced Merchant Discount Rate (MDR) that it charges on the use of Rupay debit cards to businesses be it on physical platforms like POS (point of sale) and QR code or e-commerce websites. “As per the latest notification, MDR has been revised to 0.60 per cent for transaction above Rs 2,000 with a maximum cap of Rs 150 per transaction. Presently, this is capped at 0.90 per cent for transaction above Rs 2,000 with a higher cap of Rs 1,000 per transaction,” a release from the NPCI says. The new MDR rates notified by the NPCI will come into effect from October 20.
As there has been a considerable rise in the use of QR codes, NPCI has also reduced the rate of MDR on Bharat QR Codes. “The card-based QR transactions (Bharat QR) MDR also has been reduced to 0.50 per cent with a maximum cap of Rs 150 per transaction, to boost asset-light infrastructure for digital payments,” said the release from NPCI.
High level of Merchant discount rate – often around 2 per cent in the past – had been one of the primary reasons why various merchants resisted in offering this option to their customers. Some who offered this payment option to their customers asked customers to bear the burden of the MDR or make payment in cash.
International payment gateway providers such as Visa and MasterCard offered the payment settlement infrastructure for which they charge the debit or credit card providers, which are mainly banks. Rupay is an Indian alternative to these international payment gateways, which has been developed by NPCI.
Gradual reduction of MDR is helping many such merchants to offer this payment option to customers. As shopping activities will significantly increase around Diwali, the move is an attempt to boost the digital payment usages during these festivities.
“Significant reduction in MDR will encourage the use of debit cards. With the reduction and capping of MDR, merchants will now be encouraged to accept debit cards, which up until now they were averse due to higher MDR structure. In line with the vision of the government and RBI for less-cash India, NPCI’s commitment to helping faster migration from cash to digital, this MDR rationalisation along with the similar significant reduction in UPI MDR, will benefit all categories of merchants,” says Dilip Asbe, MD & CEO.
NPCI has been aggressively pushing the digital payment systems in India and introduced various applications both in digital and physical modes such as IMPS, UPI, Bharat QR code and so on to improve the usage of digital transactions in India. The current reduction in MDR is aimed at making it more attractive for shopkeepers to offer digital payment options to their customers, thereby increasing merchant acceptance footprint across the country.