The Modi led NDA Government government has decided to bear the charges merchants pay to banks on purchases of up to Rs 2,000 using a debit card, Bhim or Aadhaar to encourage cashless transaction. The subsidy will be available for a period of two years starting from January 1, 2018.
Announcing the decision taken at the Cabinet meeting on Friday, IT minister Ravi Shankar Prasad said that the government was trying to accelerate digital payment in the country. He added that a committee of secretaries had been set up to ensure that there was no misuse of the subsidy and that benefits are passed on to traders and customers.
Every time a card is swiped, a merchant pays a fee to the bank. This fee is deducted by the bank while crediting the sale proceeds to the merchant’s account and is called merchant discount rate (MDR). Last week the Reserve Bank of India had announced a revised MDR of 0.9% for large merchants and 0.4% for those with a turnover of below Rs 20 lakh per year.