Need to set MDR limit on debit cards to promote digital transactions: report

To promote digital transactions, the government needs to limit the merchant discount rate (MDR) on all types of debit and prepaid cards to 0.6 percent of the transaction value. A study conducted by the Indian Institute of Technology, Bombay suggested that the upper limit should be fixed at Rs 150 for MDR at a fixed rate of 0.6 per cent.

The study said, “To encourage digital payments, for small and medium merchants accepting POS-based payments, where the annual turnover is up to Rs 2 crore, the MDR limit for transactions up to Rs 2,000 may be increased to 0.25 per cent. , While for transactions of more than 2,000, this limit can be up to 0.6 percent.

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Currently, for businesses with an annual turnover of Rs 20 lakh or more, the debit card MDR limit is 0.9 percent of the transaction value, which can be up to a maximum of Rs 1,000. The report also recommended the removal of the Goods and Services Tax (GST) on POS machines to boost the infrastructure for digital transactions.

The report cited the shortcomings associated with the use of expensive credit or debit cards, stating that RBI needs to promote India QR carefully. It states that by separating the Bhima-UPI QR from the static India QR, the negative feelings that can be raised about the QR code can be reduced.