RBI Will Reimburse Banks’ MDR Charges For Debit Card Payments To Government
The RBI will reimburse banks for the MDR claims.
The government will absorb any merchant discount rate on debit card transactions while making payments to them.
The Reserve Bank of India (RBI) will reimburse banks for the MDR on debit card transactions for tax and non-tax dues to the government with effect from January 1, 2017, the central bank said in a notification on Thursday.
Authorised banks are required to submit their claim for reimbursement of MDR along with statutory auditor's certificate, as in the case of agency commission claims, to the Central Account Section of the RBI's Nagpur branch on a quarterly basis. In case of tax payments, it also needs to submit a certificate of non-receipt of MDR from the tax payer. The claims for the fourth quarter can be made up to April 30, 2017.
Merchant discount rate is charged to a merchant by a bank, for providing debit and credit card services. Essentially any merchant with a point of sale terminal at its shop has to pay MDR to banks for every transaction made through it.
The decision was along expected lines since the finance ministry had issued a memorandum on February 29, 2016 saying government organisations and central public sector undertakings will take steps towards rationalising the MDR framework for card transactions.
After demonetisation came into effect in November last year, the RBI issued another circular on December 14, 2016 with the operational modalities for absorption of these charges.
The central bank’s notification said would Budget 2017 would have the necessary provisioning for this announcement under the demand for grant of the Department of Economic Affairs. It had added that the RBI will scrutinise the MDR claims of authorised banks before reimbursement.