Card-payment Waiver Pushed Back to Sept 1

The Reserve Bank on Wednesday said reduction in merchant discount rate (MDR) for purchases made by debit card payment to 0.75-1%, 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% 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.

RBI has been requested to grant time for effecting these changes, it said.

“In view of the operational difficulties ... it has been decided to allow extension of time till end of August, 2012 to comply with the directions on merchant discount rates,” RBI said.

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% for debit card purchases up to R2,000. For purchases over R2,000, the MDR was limited to not more than 1%.

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.

Financial Express, New Delhi, 05-07-2012