SBI Has Waived Merchant Discount Rate Charges For Small Businesses For One Year, Know About It
Source: Economic Times | Image Courtesy: CFO India |�realsec
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In a move likely aimed at giving it an advantage over private sector banks in the digital banking market, the State Bank of India (SBI) waived the Merchant Discount Rate (MDR) for small merchants.

The Merchant Discount Rate (MDR) is the commission paid to the bank for every transaction made by the user. Charges on debit card transactions as on 1 January 2017 are 0.25% on debit card transactions worth Rs. 1000 and 0.5% on transactions worth Rs. 2000.

Since 2012, the Reserve Bank of India (RBI) has capped the MDR for debit card transactions up to Rs. 2000 at 0.75% and for transactions above Rs. 2000 at 1%.

“State Bank of India has decided to waive completely, the MDR charges on debit card transactions for all small merchants having annual turnover of up to Rs 20 lakh, for a period of one year — up to December 31, 2017,” the SBI said in a statement.

The SBI is in the public sector, the biggest lender in the country, and the largest banking and financial services company in India by assets.

SBI’s move is primarily targeted towards smaller merchants who are not very used to card payments. “The Bank believes that this gesture would go a long way in changing the perception towards the cost of using Digital channels and supplement the Government’s Cashless India Drive,” the SBI said.

The SBI expects its move to help small merchants overcome the apprehensions towards joining this journey by installation of Point of Sale (PoS) terminals in their shop. PoS terminals are electronic devices used at retails outlets to process credit/debit card transactions.

Since the note demonetisation of 8 November 2016, the Government has been pushing for more digital transactions and a transition into a cashless economy. For example, to encourage card payments, it had previously exempted transactions charges for all debit card transactions from 23 November 2016 till the end of the same year. However, at the same time, critics have been sceptical about the practicality of the Government’s moves to make India a cashless economy.

How long a way the SBI’s move will go in encouraging merchants and small businesses to endorse digital payments is yet to be known. Similarly, the effects this move will have on the businesses themselves and the prices they charge customers is yet to be analysed.

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Editor : The Logical Indian

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