Govt to bear MDR charges on debit card payments up to Rs 2000 for two years

In a bid to give a boost to digital transactions in the country, the Union Cabinet on Friday decided to bear the Merchant Discount Rate (MDR) applicable on all BHIM UPI, AePS and debit cards up to Rs 2000.

The Cabinet said that the government will bear the MDR for the next two years, with effect from January 1, by reimbursing the same to the banks. 

The decision was taken at the Cabinet meeting chaired by Prime Minister Narendra Modi, Prasad said.

"For all the transactions less than Rs 2,000 in value, the consumer and the merchant will not suffer any additional burden in the form of MDR," the T Minister Ravi Shankar Prasad said, adding this will lead to greater adoption of digital payment modes for such transactions.

The minister added, since such transactions account for sizable percentage of transaction volume, the decision will help move towards less-cash economy.

When payment is made at a merchant point of sale, MDR is payable by the trader to the bank. Now, after the cabinet decision consumer and merchants will not suffer any additional charges in form of MDR.