There is some confusion for the government's drive for increasing card transactions. The Reserve Bank of India (RBI) has instructed banks not to deduct MDR charges from government receipts and that they should remit the full amount paid to the government by card customers to the concerned government and ministry. MDR is an interbank fee levied on merchants for facilitating a card transaction. The RBI also clarified that it is not absorbing the MDR of credit card transactions and the MDR on debit transactions above Rs 1 lakh. On February 2017, while trying to boost card payments, the government of India decided to absorb MDR on debit card transactions while making payments to the government. Banks were needed to forward their claims for reimbursement on a quarterly basis. The claims are supposed to be signed by the bank's officer in charge of government banking the officer was supposed to ensure that only debit card transactions up to Rs 1 lakh could be claimed. What this means - Focus on debit cards: With this notification, the government and the RBI have made it abundantly clear that it wants to focus on pushing debit card transactions AND not credit card transactions. Credit cards attract a higher MDR - around 2.5-1.7% of the transaction amount. So it's natural that the government would not want to absorb the MDR for these transactions. - Focus on granular transactions: Debit cards transactions above Rs 2,000 will attract an MDR of 0.75% of the transaction amount. The RBI has placed a transaction limit of Rs 1 lakh for reimbursement claims, which…
