Merchant Discount Rates Under Scrutiny Over Digital India Impact

The government will hold deliberations with the Reserve Bank to work out a mechanism for bringing down merchant discount rates (MDR) which have increased from 0.25 percent of transaction value to 0.90 percent recently, a finance ministry official said.

According to a senior finance ministry official, the surge in charges would impact Digital India movement so there is a need to look into the issue.

"Most merchants will be discouraged to use POS machines, especially small merchants who do not get input tax credit in GST. This will discourage them from using POS machines," the official said.

There are around 27-28 crore transactions that are held per month on the Point of Sale (POS) machines with an average size of Rs 1,500.

Last year after demonetisation, RBI as a special measure had capped the MDR at 0.25 percent of the transaction value for transaction up to Rs 1,000 and 0.5 percent for transactions above Rs 1,000 and up to Rs 2,000.

PTI