MERCHANT DISCOUNT RATE (MDR)

About: 

• MDR is the fee that the store accepting your card has to pay to the bank when you swipe it for payments. 
  
  
• The MDR compensates the bank issuing the card, the bank which puts up the swiping machine (Point-of-Sale or PoS terminal) and network providers such as Mastercard or Visa for their services. 
  
  
• MDR charges are usually shared in a pre-agreed proportion between them. In India, the RBI specifies the maximum MDR charges that can be levied on every card transaction. 
  
  

Union cabinet decision: 

• In 2017, Union Cabinet approved that the Merchant Discount Rate (MDR) applicable on all debit card/BHIM UPI/ Aadhaar enabled Payment System (AePS) transactions upto and including a value of Rs. 2000 will be borne by the Government. 
  
  
• This will be borne by for a period of two years with effect from 1st January, 2018 by reimbursing the same to the banks. 
  
  
• The IIT-Bombay study estimated that merchants were burdened with Rs. 10,000 crore towards credit card Merchant Discount Rate (MDR) in 2018, compared with the overall cost of Rs. 3,500 crore towards debit card MDR.