New Delhi, December 16: In a bid to boost digital payments, the Union Cabinet has approved subsidizing the Merchant Discount Rate (MDR) applicable on all debit cards, BHIM UPI and Aadhaar enabled Payment System transactions up to Rs 2000.
A Committee comprising of Secretary Department of Financial Services, Secretary Ministry of Electronics & I.T. and the CEO, National Payment Corporation of India (NPCI) will look into the industry cost structure of such transactions which will form the basis to determine the levels of reimbursement.
It is estimated that the MDR to be reimbursed to the banks in respect of transactions less than Rs.2000 in value would be Rs.1,050 crore in FY 2018-19 and Rs.1,462 crore in FY 2019-20.
When payment is made at a merchant point of sale, MDR is payable by the merchant to the bank. Citing this, many people make cash payments inspite of having debit cards. Similarly, MDR is charged on payments made to merchants through BHIM UPI platform and AePS.