Dear friends here we bring you the banking and economic term, which are trending in national newspapers. this all terms are very important for upcoming exam like RBI assistant mains, Syndicate bank and others banking exams. DO mug up all these terms.
India is on the cups of cashless economy. Government move to Demonetized the higher value currency notes has provided the perfect launchpad for India to go cashless. an environment for cashless economy is in its nascent stage. Card payments include payments made using debit cards, credit cards or prepaid / stored value cards. These cards are supposed to replace cash especially for low value transactions.
To facilitate digital transactions, the Merchants have to set payment infrastructure like PoS (Point of Sale) machines and they have to start a unique account which is called the Merchant Account with a bank to avail payments from the customers. As the banks provides payment services, the merchants have to give a payment to the bank for using the payment infrastructure set up by the bank. This payment is called Merchant Discount Rate (MDR).
what is Merchant Discount Rate ?
It is a fee charge to a merchant by a bank for accepting payment from their customers in credit and debit cards every time a card is used for payments (like swiping) in their stores. The merchant discount rate is expressed in percentage of the transaction amount.
Merchant discount rate = Interchange fee + Processing fees + Network brand fees
In a simple word MDR is a fee charged to merchant by a bank to access its payment infrastructure like point of sale (POS).
RBI on MDR
For the time being, the aim of the RBI is to push maximum cashless transaction. Aiming this objective, the RBI has brought a policy of setting upper limit for MDR by banks. Here, the Reserve Bank had rationalized the Merchant Discount Rate (MDR) for debit cards with effect from September 2012.
Since then, the MDR for debit card transaction has been capped at 0.75% for transaction values upto Rs.2000 and at 1% for transaction values above Rs.2000.
#RBI Policy on MDR.