Reduction in Discount Rate on debit card payments deferred to Sep 1

http://www.financialexpress.com/section/banking-&-finance/349/

The Reserve Bank today said reduction in merchant discount rate (MDR) for purchases made by debit card payment to 0.75-1 per cent, which was to be effective from July 1, will now be applicable from September 1 due to some operational issues.

MDR is the fees charged by banks (or the issuer of debit card) from a businessman for accepting payment through debit or credit cards from their customers. It stands at 2-3 per cent at present.

"We have received several representations from banks and system providers that implementation of the directive needs to be preceded by modifications in the computer systems and agreements with merchants," RBI said in a notification.

Accordingly, the scheme will become operational from September 1, 2012, the RBI notification said.

On June 28, RBI had slashed the merchant discount rates to not more than 0.75 per cent for debit card purchases up to Rs 2,000. For purchases over Rs 2,000, the MDR was limited to not more than one per cent.

These rates were applicable from July 1, 2012.

The RBI directive had come to encourage usage of debit cards, especially by small merchants or service providers and location.

Until now, the MDR on debit and credit cards has been similar in the country. Where debit card is mostly used as per availability of funds, credit card usage is linked to the credit limit sanctioned by the issuer (or the bank) and carries and element of credit risk. Since the nature of two products is different there was no rationale of charging similar MDR for debit and credit cards, RBI said last week.

Source:www.financialexpress.com