What is MDR & the impact of MDR Waiver?

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what is mdr

How the MDR Waiver can impact us?


Merchant Discount Rate is the rate that the merchant has to give whenever he/she takes payment through debit or credit card. The MDR is agreed upon prior to setting up the service and making cashless payments. MDR is expressed as a percentage of the transaction amount.

It is also applicable to online transactions and QR-based transactions. It is shared between three entities- card issuing bank, PoS machine vendor and payment gateways such as Mastercard, RuPay or Visa for their services.

What is the recent update on MDR?

 A recent announcement by the Finance Minister said :

  • Businesses with an annual turnover of more than Rs 50 crores will have to offer low-cost digital payment options to customers. Such as BHIM UPI, UPI QR Code, Aadhaar Pay, Debit Cards, NEFT, RTGS, etc.
  • Merchant Discount Rate (MDR) will not be levied. Which means for any digital transactions made using RuPay credit cards, or UPI QR codes, there will be no MDR

What are the positive impacts of this move?

This move is in alignment with PM Modi’s vision of a “Digital and cashless economy”. It will help the merchants and consumers to go for more cashless transactions and boost the digital economy.

Nirmala Sitharaman also said, “RBI and banks will absorb these costs from the savings that will accrue to them on account of handling less cash as people move to these digital modes of payment.”

 A total of 2% of our GDP goes into minting, handling, and accounting of cash. With the move towards a cashless economy, the Government wants to reduce this expenditure.

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What is the downside?

  • A lot of people have shown dissatisfaction with this news. The major players such as VISA feel that zero MDR will leave the banks and payment service providers with no incentive to invest in the infrastructure.
  • As these companies will not get any benefit, they will also not invest much and it might lead to losses.
  • In the long run, Credit Card companies would feel the impact of this as people will shift to cheaper digital options.
  • A lot of people also say that the cost should be borne by the Government as banks have no benefit in promoting digital payments without MDR revenues.

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