Backing the government’s effort to push digital transactions, State Bank of India (SBI) on Monday said that it would waive charges on debit card transactions for small merchants.
Fees, also known as the merchant discount rate (MDR) charges, will be waived for merchants with an annual turnover of up to Rs 20 lakh for a period of one year, said the lender in a media statement.
The move is targeted primarily towards a segment of population and small merchants, who have not yet experienced the convenience of card payments.State Bank of India Media Statement
Smaller merchants are typically reluctant to move towards digital payments due to the costs associated with such payments. This has also been cited as one of the reasons that small merchants have been slow to adopt newer technologies like the United Payment Interface (UPI).
By withdrawing the MDR charges, SBI, the country’s largest bank, is hoping to convince small merchants to move away from cash.
The government has been pushing digital payments as an alternative to cash transactions ever since it decided to withdraw Rs 500 and Rs 1,000 notes in November 8. The decision had led to a shortage of currency, which persists even today.
Immediately after the demonetisation decision, a number of banks had waived MDR charges until December 31, 2016. The charges, however, were intended to come back once the availability of cash normalised.
A government-appointed committee on digital payments, whose report was made public last month, had cautioned against imposing regulations on market-driven charges on digital payments. This, they felt, would disincentivise banks from pushing digital payment means such as credit and debit cards.
“...a market driven MDR is an important element in the business of card infrastructure, including setting up and running the terminals. Capping the MDR reduces this incentive,” the committee observed.
It said MDR should be left to be determined by market forces.