As in the past, it is up to the merchants to decide if they will bear the burden of the charge or bill it to the customers. Subhomoy Bhattacharjee reports.
Illustration: Uttam Ghosh/Rediff.com
The government on Sunday said charges on cards that had been waived till the end of December cannot be extended further without impacting the health of banks.
"The issue will have to be discussed with the RBI (the Reserve Bank of India), which has asked for time till March 31 to sort it out," said a source in the government. Till then the charges, known as Merchant Discount Rate or MDR, will remain.
Petrol pump dealers or anyone else who accept a card payment for a sale of goods or services pays a fee known as the MDR. The fee is shared between the bank which issued the card and the bank through whose gateway the payment is made.
It is up to the merchants to decide if they should carry the charge on themselves to attract more footfalls or bill it to the customers.
The RBI had in 2012 decided that while credit card holders will continue to pay an MDR of 2 per cent on all transactions, the ecosystem for debit cards needed to be tweaked. It had, accordingly, cut the MDR on debit cards. For transactions till Rs 2,000, the rate was slashed to 0.75 per cent and 1 per cent for transactions above that.
The world of e-commerce changed drastically on November 8. As cash dried up, the government asked for a full waiver of MDR charges -- the catch was it was only till December 31.
From January 1, as the RBI has advised, MDR on debit cards returned but at a lower fee. For transactions up to Rs 1,000 it is 0.25 per cent of the value of the sale; for up to Rs 2,000 it will be 0.5 per cent. It is up to the banks to decide if they would remain satisfied with the same rates for sales of above Rs 2,000 or revert to 1 per cent as earlier.
The issue was discussed by the finance ministry over the weekend. It has been decided to let the charges continue, as there is no mechanism with the government to defray the cost to them. "It will be like a subsidy if we do so now," the source said.
Incidentally, the payments platforms as of now do not charge a commission on e-wallets. But, as a Paytm advertisement noted, the charges will be free only till the end of January, when its payments bank opens its doors for business. The charges will be zero for business done through the bank, Paytm notes. The implication is for routing money through other banks, there could be costs.
The RBI circular consequently notes it plans to assess these charges; "In the intervening period, the Reserve Bank of India will review the framework for charges for electronic payment transactions, in consultation with the stakeholders."
