Page 32 - Banking Finance September 2020

ARTICLE

DIGITAL PAYMENTS

AND MERCHANT

DISCOUNT RATE

(MDR)

M DR has once again come into the news MDR is a fee charged from a merchant by a bank for

accepting payments from customers through credit and
headlines with an announcement by India's
debit cards in their establishments.
Finance Minister Smt. Nirmala Sitharaman
last month December 2019.
MDR compensates the card issuing bank, the lender which
puts the PoS terminal and payment gateways such as
The news is -" From 1st January, 2020, businesses with an
MasterCard or Visa for their services.
annual turnover of more than Rs.50 crore will have to offer
low cost digital payment options to customers and How MDR is fixed
Merchant Discount Rate (MDR) will not be levied on either
MDR charges are usually shared in pre-agreed proportion
customers or merchants."
between the bank and a merchant and are expressed in
What is MDR percentage of transaction amount.
MDR is the cost paid by a merchant to a bank for accepting The rate is determined based on below mentioned factors
payment from their customers via credit or debit cards every X Volume
time a card is used for payments in their stores.
X Average ticket price,
In simple word we can say, X Risk
X Industry
About the author
The merchant discount rate is expressed in percentage of
Gautam Kumar Sagar the transaction amount.
Senior Manager & Faculty
Bank of Baroda, Baroda Academy, Impact of Demonetization
Vadodara (Gujarat)
Demonetization fuelled the digitization and digital payments

32 | 2020 | SEPTEMBER | BANKING FINANCE