Lok Sabha Question No. 3805 (UNSTARRED), answered on 2017-03-24
Subject: Merchant Discount Rate
Ministry: FINANCE
Asked by: A. ARUNMOZHITHEVAN, YERRAM VENKATA SUBBAREDDY

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA

## UNSTARRED QUESTION NO. 3805

TO BE ANSWERED ON 24 th  MARCH, 2017/ CHAITRA 3, 1939 (SAKA)

## MERCHANT DISCOUNT RATE QUESTION

## 3805: SHRI A. ARUNMOZHITHEVAN:

## SHRI Y.V. SUBBA REDDY:

Will the Minister of FINANCE be pleased to state:

- (a) the  details  of  the  directive  issued  by  the  Government  to  digital  payment  companies  to abolish card fees;
- (b) whether  the  Committee  of  Chief  Ministers  also  recommended  abolishing/capping  of Merchant Discount Rate for digital payments made;
- (c) if so, the details thereof and the reasons that digital payment companies are adamant to abolish card fees;
- (d)  the  efforts  being  made  by  the  Government  to  persuade  above  companies  to  accept  the recommendation for promotion of digital payments; and
- (e) whether the RBI has issued a draft circular where it classified merchants with small and other categories with levy of 0.95 per cent of the transaction size permitted and if so, the details thereof?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI ARJUN RAM MEGHWAL)

(a) to (d)  Pursuant to the Government Initiative to promote digital payments, a Committee of Chief Ministers  on  digital  payments  was  constituted  in  NITI  Aayog  on  30th  November  2016  which submitted its interim report to Hon'ble Prime Minister on 24th January 2017. The committee made the following recommendations on Merchant Discount Rate (MDR):

*    AEPS/ Aadhaar Pay to be promoted by providing incentives to small merchants for scaling digital payments acceptance network and no MDR to be charged for AEPS enabled merchants.
*      A  detailed  review  of  MDR  regime  should  be  undertaken.  The  Committee  has  already forwarded its recommendations on the subject to RBI. The new regime should consider change in technology,  business  models  of  payment  service  providers  &  anticipated  increase  in  digital transactions.
*    Small merchants below a given threshold of transaction volume/value (turnover up to Rs. 2 lakh per month), should be permitted to self-board on UPI/ AEPS modes and accept payments without any MDR
* In order to facilitate wider acceptance of card payments, the following special measures for debit card transactions (including for payments made to Government), were introduced for a temporary period between January 1, 2017 and  March 31, 2017 ;
- i. For transactions upto ₹ 1000/-, MDR has been capped at 0.25% of the transaction value.

ii. For transactions above ₹ 1000/- and upto ₹ 2000/-, MDR has been capped at 0.5% of the transaction value.

(e)          Reserve  Bank of India has placed on its website a Draft Circular on Rationalization of Merchant Discount Rate (MDR) for Debit Card Transactions and sought public feedback on the draft circular.

To encourage a wider segments of merchants to accept card payments, consultations were held with stakeholders for rationalizing the MDR Structure for debit card transactions. This draft circular seeks a shift from present slab-rate MDR based on transaction value to merchant turn over based MDR structure for merchants have been suitably categorized. A differential MDR structure for  asset  light  card  acceptance  infrastructure  like  QR  Code,  Special  Merchant  Categories  foe government transactions and other transactions involving non- discretionary expenses have also been proposed.  The feedbacks are being compiled , analysed for finalisation of the MDR structure by RBI.

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