Govt. Removes MDR For Digital Payments; Introduces 2% Fee On Cash Withdrawal
In one of the biggest announcements related with cashless push and Digital India, Govt. has decided to remove MDR for all digital payments, which means from now on, all Digital Payments will be free of any additional charge.
Meanwhile, an extra 2% surcharge on cash withdrawal has been proposed, which will mainly impact big, traditional businesses.
Will 2019 prove to be a new dawn for Digital India?
No MDR On Digital Payments
MDR or Merchant Discount Rate is a fees which banks charge from merchants, for using their debit cards or for any digital mode of payment/transfer like money upload on Paytm wallet using a bank’s debit/credit card.
In the Budget announcement, Finance Minister Nirmala Sitharaman has said that from now on, there will be no MDR on digital payments.
However, there are some terms and conditions related to this announcement:
- No MDR for merchants, who have annual turover of more than Rs 50 crore. This will cover most of retail outlets, and super-market chains, multiplexes and hypermarkets, where customers pay for their purchase via debit/credit cards
- Initially, this will be rolled out for payment interfaces such as UPI and platforms such as BHIM and Aadhaar Pay.
- In hr speech, the Minister also said that certain debit cards and credit cards would be applicable for the waiver, but she didn’t name them. Most probably, it would be RuPay to start with, and gradually, it will cover other card platforms as well.
Note here, that there is no MDR for digital transactions below Rs 2000, since 2017.
The Minister said, “There are low-cost digital modes of payment such as BHIM UPI, UPI-QR Code, Aadhaar Pay, certain Debit cards, NEFT, RTGS, among others,”
Now, once this new rule to waive off MDR is applied on other businesses, every Digital Payment in India will be free.
A great move to push for Digital India.
2% Surcharge On Cash Withdrawal
In the budget, Finance Minister also announced that henceforth, there will be a special 2% surcharge on all cash withdrawals over Rs 1 crore.
This is expected to impact traditional businesses, which are still reliant on cash transactions, despite the facility of digital payments and transfer.
This is another big move to push for Digital India, and will discourage cash usage.