‘Revised MDR by RBI detrimental to merchants’

While the RBI has mentioned in its circular that the rates have been ‘rationalised’ to increase the acceptance of debit cards by a wider set of merchants, the increase in the rates and the high cap set defeats the purpose as this increases cost to merchants by almost double. 

In a retail business, especially a supermarket or hypermarket where the margins are just 2% - 3%, such an increase in MDR will have a huge impact on costs, making it imperative for retailers to pass it on to the consumer. There is no validation for the charges that are being levied for debit card transactions to this extent, especially when we consider that UPI transactions are free and IMPS, NEFT & RTGs transactions cost next to nothing. 

“And since a debit card transaction is nothing but direct debit from the bank account of the consumer, there is no credit risk for the issuing bank. Therefore, there is no justification for this type of huge increase in MDR. In addition, the RBI has set the maximum limit for MDR at Rs 1000, which is unrealistic as it means that the transaction size is nearly Rs 1.1 lakh,” says RAI CEO Kumar Rajagopalan.