In a major development which can set a standard for cashless transactions in India, oil marketing companies have agreed to bear and absorb MDR or Merchant Discount Rate fees applicable on cashless transactions at petrol pumps.
However, there are several terms and conditions attached to this decision, major being:
- Oil companies will only absorb MDR fees for debit card usage
- Till arrangement has been made till March 31st
- Only state-run OMCs (oil marketing companies) : Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd will absorb the MDR fees as of now
Hence, petrol pump owners or customers will not have to pay for MDR for usage of debit cards till March 31, which is a big relief for them.
As per reports coming in, the MDR on all debit card transactions at petrol pumps would be directly routed to the banks by the concerned oil companies; rather than charging the dealers with MDR first, and then reimbursing them later (if any reimbursement was approved).
Oil companies have agreed to bear this additional cost on the suggestion and advisory of RBI, which is trying everything possible to increase cashless transactions.
Only Debit Cards Applicable For MDR Relief
Interestingly, oil companies have decided to absorb MDR fees of only debit card transactions, and not credit card transactions. One unnamed official has revealed that this decision as taken after ‘assuming’ that credit card holders are rich enough to pay MDR without any hassles.
That official from one the OMC said, “We thought that people who can afford a credit card would not mind a 0.25% to 1% charge on payment..”
The other reason attributed for ignoring credit card transactions is that credit card holders are anyways enjoying an interest-free period of 30-40 days to pay the charges. Besides, they are also enjoying 0.75% discount, which is actually applicable on all cashless transactions, as announced by Indian Govt. last year in December.
The Bone Of Contention for Cashless Transactions: MDR Fees
Even as PM Modi and Indian Govt. is aggressively pushing for cashless transactions, the issue of MDR is the bone of contention for merchants, banks and the customers.
After MDR fees were re-introduced after waiving it off last year (due to demonetization), petrol pump owners held a massive strike to oppose this fees, as their income was drastically reduced due to this fees.
1-1.5% additional charge for using card-based payments meant that 20-40% profit of petrol pump owners was being directly destroyed. And this was not taken lightly.
Last week we reported that Indian Govt. will make debit card charges transactions cheaper, as MDR would be now linked with transaction purpose and volume of the business, rather than a flat fee for all types of transactions.
Till some concrete decision is taken in this regard, this decision by oil companies to absorb MDR fees is a welcome respite for both petrol pump owners and consumers, albeit this is applicable only till March 31, 2017.
We will keep you updated as more details come in.."Customers, Petrol Pump Owners Need Not Pay MDR As Oil Companies Agree To Bear MDR Fee For Debit Cards Till March 31",