Digital Payments: Oil companies step up to bear merchant discount rate on fuel purchase

Oil companies have said they will bear the merchant discount rate (MDR) on payment for fuel via debit or credit cards. MDR is fee levied by the banks for payments made by bank cards. 

According to a report by LiveMint, oil companies like Indian Oil Corporation, Bharat Petroleum Corp and Hindustan Petroleum Corp will bear the MDR fee whenever anyone swipes their cards to pay for fuel at fuel pumps.

This effectively answers the question of who would bear MDR, the oil companies or the banks. However, they have only agreed to bear the cost till March 31. 

MDR, levied by banks, stands at 1% on credit cards and 0.25% to 1% on debit card payments. 

After demonetization, the government had waived off all the surcharges and levies on fuel purchases made through cards, in a bid to incentivise digital payments.

However, the waiver on MDR lasted till December 31. Petrol pump operators refused to bear the cost, even threatening to go on a strike against the fee or even discontinue card transactions completely, according to the report. So far, the oil marketing companies have agreed to bear the cost till March 31, 2017. 

The aforementioned report said that bearing the MDR cost may dent the oil companies' revenue by about Rs 100 crore.