Govt to bear debit card transaction costs up to Rs2,000 for 2 years

For two years beginning 1 January 2018 customers will not have to pay any transaction charges for payments of up to Rs2,000 made through debit card, BHIM app and other payment modes.

The central government will bear transaction costs applicable to debit card / BHIM UPI / Aadhaar enabled payment system (AePS) for a value up to and including Rs2,000 for a period of two years beginning 1 January 2018, says an official release.

A meeting of the union cabinet headed by Prime Minister Narendra Modi today decided that the merchant discount rate (MDR) applicable on all debit card/BHIM UPI/ Aadhaar enabled payment system (AePS) transactions up to and including a value of Rs2,000 will be borne by the government for a period of two years with effect from 1 January 2018 by reimbursing the same to the banks,'' the release said.

Last month, the union cabinet approved a proposal that government will bear the merchant discount rate (MDR) charges on transactions up to Rs2,000 made through debit cards, BHIM UPI or Aadhaar-enabled payment systems to promote digital transactions.

"Happy Digital 2018. December Quarter BHIM transaction rises 86 per cent to 145.6 million with value of Rs 13,174 crore," financial services secretary Rajiv Kumar said in a tweet.

"Further impetus to digital payments, government to reimburse charges for transaction up to Rs2,000 on debit cards/BHIM. Zero charges on merchants. Go Digital, embrace transparency," he added.

The decision will have an impact of Rs2,512 crore on the exchequer.

The reimbursement of MDR in respect of transactions less than Rs2,000 in value is estimated to cost the government roughly Rs1,050 crore in FY 2018-19 and Rs1,462 crore in FY 2019-20, the release added.

A committee comprising secretary in the department of financial services, secretary, ministry of electronics and IT and the CEO, National Payment Corporation of India (NPCI) will look into the industry cost structure of such transactions which will form the basis of determining the levels of reimbursement.

''As a result of this approval, for all transactions less than Rs2000 in value, the consumer and the merchant will not suffer any additional burden in the form of MDR thereby leading to greater adoption of digital payment modes for such transactions,'' the release said, adding, ''Since such transactions account for sizeable percentage of transaction volume, it will help to move towards a less cash economy.''