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Digital transactions of up to Rs 2K to get refunds

It is expected to cost Rs 2,500 crore to the exchequer

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To drive adoption of digital payments across the country, the government will reimburse merchant discount rate (MDR) applicable on digital transactions of up to Rs 2,000 for the next two years.

This will be applicable on transactions carried out using debit cards, UPI BHIM application, or Aadhaar. MDR is payable by the merchant to the bank when a payment is made at a merchant point of sale.

This decision was approved by the Cabinet on Friday. The move is expected to cost Rs 2,500 crore to the exchequer and will be applicable from January 1, 2018.

"The government has taken a major decision that to accelerate digital payments in the country, the MDR charges in transactions up to Rs 2,000 shall be reimbursed by the government to banks," Electronics and IT Minister Ravi Shankar Prasad said.

"Citing MDR, 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," he said.

For all transactions less than Rs 2,000 in value, the consumer and the merchant will not suffer any additional burden in the form of MDR which will increase adoption of digital payments.

Acoording to government's estimates, 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.

Debit card transactions worth over 2.18 lakh crore have carried out from April-September 2017 and we expect the debit card transactions amounting to over Rs 4.37 lakh crore by the end of current financial year, Prasad said.

A Committee comprising of Secretary, Department of Financial Services; Secretary Ministry of Electronics & IT; 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.

REIMBURSEMENT

  • The decision was approved by the Cabinet on Friday.
     
  • It is expected to cost Rs 2,500 crore to the exchequer.
     
  • It will be applicable from January 1, 2018.
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