The Merchant Discount Rate (MDR) for debit card payments, including for payments made to government, will be capped at 0.25 per cent for transactions up to Rs 1,000 and 0.5 per cent between Rs 1,000-2,000, RBI said in a notification.
The existing MDR cap is 0.75 per cent for transactions up to Rs 2,000 and 1 per cent for over Rs 2,000. However, there is no RBI cap on MDR on credit card payments.
In the intervening period, Reserve Bank will review the framework for charges for electronic payment transactions, in consultation with the stakeholders.
Similarly, it has asked banks and prepaid payment instrument issuers not to levy any charges for transactions up to Rs 1,000 from January 1 to March 31.
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This would cover transactions through Immediate Payment Service (IMPS), USSD-based *99# and Unified Payment Interface (UPI) systems.
The relaxations, RBI said are in tandem with initiatives taken by the government to "incentivise greater adoption of digital payments by large sections of the society."
Merchant discount rate is the rate charged to a merchant by a bank for providing debit and credit card services. The rate is determined based on factors such as volume, average ticket price, risk and industry.
As of October 2015, there were 61.5 crore debit card users and 2.3 crore credit card holders in the country.
Government has announced a slew of measures, both for customers and merchants, to encourage digital payments in the country ever since it sucked out a large portion of cash circulating in the economy.
Besides, a lucky draw cashback reward scheme for consumers and merchants will start from the Christmas till mid of April for Rs 50-3,000 transactions through digital means.
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