What is Merchant Discount Rate?

Posted by: Labdhi Mehta on Jan 08, 2018, 06.30 AM IST

1. MDR is a fee charged from a merchant by a bank for accepting payments from customers through credit and debit cards in their establishments.

2. MDR compensates the card issuing bank, the lender which puts the PoS terminal and payment gateways such as Mastercard or Visa for their services.

3. MDR charges are usually shared in pre-agreed proportion between the bank and a merchant and is expressed in percentage of transaction amount.

4. Since 1 January, small merchants pay a maximum MDR of 0.4% of bill value and larger merchants pay 0.9%.

5. To promote digital transactions, the government will bear MDR charges on transactions up to Rs 2,000 made through debit cards, BHIM UPI or Aadhaar-enabled payment systems.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)
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This article appeared in Economic Times dated Jan 08, 2018, 06.30 AM IST