At a time when petrol pumps were locking horns with banks over charging a 1% merchant discount rate (MDR), State Bank of India (SBI) has waived the MDR charges on debit card transactions for all small merchants having annual turnover of up to Rs 20 lakh till December 31, 2017. MDR is an interchange fee that banks charge merchants for enabling digital transactions.
SBI is the largest issuer of POS terminals in the country with 342,689 machines (as of October 2016) in the country and overtook its rival HDFC Bank in May 2016. The bank added that close to 70% of its POS terminals are deployed in non-metro centres.
MediaNama has been pointing out that India has one of the lowest POS terminal penetration in the world. According to a 2015 Ernst and Young report, there were only 693 machines per million of India’s population, compared to similar emerging countries such as Brazil, which has 32,995 terminals per million people and China and Russia, each of which has around 4000 terminals per million people. However, the number of debit cards in circulation are over 700 million.
There is also a curious concentration of the top banks in the country having the largest number of POS machines. State Bank of India, ICICI Bank, HDFC Bank, Axis Bank and Corporation Bank – have the highest number of POS terminals accounting for 80.94% of all terminals in the country. The RBI counts 56 scheduled commercial banks in the country. Not to mention that there are 56 functioning regional rural banks and 93 cooperative banks.
Up to March 31st, for debit cards, the Reserve Bank of India has allowed banks to charge merchants 0.25% of the transaction value as MDR, for transactions up to Rs 1000, and 0.5% from Rs 1000 to Rs 2000. Earlier, the debit card MDR for banks was capped at 0.75% of the transaction amount for value up to Rs 2000 and not exceeding 1% for transaction amount for value above Rs 2000. Following demonetization of Rs 500 and Rs 1000 notes, several banks, including SBI, ICICI Bank, Axis Bank and Yes Bank had waived MDR charges on debit card transactions till December 31.