RBI revises merchant discount rate (MDR) for debit card transactions


To promote debit card acceptance by smaller merchants, the Reserve Bank of India (RBI) rationalised the merchant discount rate (MDR) for debit card transactions.

Revised-MDR-debit card transactions
Debit card usage in the current fiscal jumped to 2.4 billion transactions from 800 million in the previous year.

In the recently released Monetary Policy Statement, the RBI mentioned the revised MDR framework for debit card transactions.

The revision of discount rates is aimed to achieve two broad objectives –

  • To encourage small merchants and a wider group of merchants to accept debit card payments
  • To ensure sustainable business environment for those accepting debit card payments

The revised merchant discount rates, which will be effective from 1 January 2018, are categorised based on the merchant’s turnover, type of infrastructure used to process debit card transactions, and type of transaction (card present or card not present).

The new merchant discount rates are listed below

Merchant Turnover

(During previous financial year)

Merchant discount rate (MDR) for debit card transactions 

Type of Infrastructure

Physical POS infrastructure/Online transactions

QR code-based

Up to Rs.20 lakh

0.40% of transaction value
(Max. MDR Rs.200 per transaction)

0.30% of transaction value
(Max. MDR Rs.200 per transaction)
Above Rs.20 lakh 0.90% of transaction value
(Max. MDR Rs.1,000 per transaction)

0.80% of transaction value
(Max. MDR Rs.1,000 per transaction)


The RBI further directed the banks to ensure that the MDR charged on the merchants is not exceeding the maximum cap per transaction. The banks are also made responsible to ensure that the merchants are not passing the MDR charges to the customers who are paying through debit cards.

MDR is levied by the banks on merchants for enabling them to accept debit and credit card transactions.

Currently, debit card transactions up to Rs.1,000 attract 0.25% MDR, while those below Rs.2,000 are levied 0.50% of the transaction value.

The new amendment has been receiving mixed criticism from the retailers as most of the big merchants complain that the revised charges will eventually increase the cost of conducting business, instead of encouraging small businesses to accept debit cards.

Managing Director of Future Group, whose card payments constitute 65% of debit card transactions, called the new framework as a regressive policy, adding that it will eventually burden the customers paying more as retailers tend to pass the higher costs.

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