RBI lowers merchant commission rate on payments via debit card

In order to encourage the use of debit cards, the Reserve Bank of India (RBI) on Thursday lowered the merchant discount rate (MDR), a charge paid by merchants to banks for a transaction done through debit cards, to 1% of the transaction. Currently, MDR ranges between 1.5% and 2.5%. Lower MDR will bring down the cost of installing Point of Sale (PoS) terminals for the merchants. As per the new RBI directive, which will be applicable from July 1, the commission will not be more than 0.75 % of transactions of up to Rs2,000 while for transactions above Rs2,000, it has been capped at 1%.