Related Topic in KAS Prelims Syllabus:
Economy [Paper-II]: Recent fiscal and monetary policy issues and their impact, structure of Indian Banking and Non- Banking Financial Institutions and reforms
Why in News?
Finance Minister Nirmala Sitharaman announced that no Merchant Discount Rate (MDR) will be applicable on transactions through homegrown RuPay and UPI platforms from January 1, 2019.
News in Detail
- The Department of Revenue (DoR) will soon notify RuPay and UPI as the prescribed modes of payment for digital transactions without any MDR.
- All companies with a turnover of Rs 50 crore or more will be mandated by the government to provide the facility of payment through RuPay Debit card and UPI QR code to their customers.
- The move is expected to boost payments via home-grown real-time payments system Unified Payments interface (UPI) at merchant locations, along with RuPay debit cards.
What is MDR?
- It is the cost paid by a merchant to a bank for accepting payment from their customers via digital means.
- The merchant discount rate is expressed in percentage of the transaction amount.
- It is also applicable for online transactions and QR-based transactions.
- The amount that the merchant pays for every transaction gets distributed among three stakeholders–the bank that enables the transaction, vendor that installs the point of sale (PoS) machine and the card network provider such as Visa, MasterCard, and RuPay.