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Journalism of Courage
The Reserve Bank of India has cut the rate of commission that customers pay to merchants at the point of sale for payments made through debit cards to between 0.75 per cent and one per cent.
Currently,both debit and credit cards have the same rate of commission ranging between 2 per cent and 3 per cent.
As per the new RBI directive,the commission known as merchant discount rate (MDR),will not be more than 0.75 per cent of transactions of up to Rs 2,000. For transactions above Rs 2,000,MDR has been capped at one per cent,as per the new rules that will be applicable from July 1.
In a statement,RBI said the MDR for debit and credit cards has been similar in India. While debit card is used as per the availability of funds,credit card usage is linked to the credit limit sanctioned by the issuer.
Thus given the different nature of the two products,there is no rationale for having a similar MDR for debit and credit cards. Further,it is observed that debit cards are mostly being used for withdrawal of cash at ATMs, the RBI said.
The RBI further said it was necessary to encourage the use of debit cards,especially at small merchants or service providers and location by way of lower MDR.
This move would encourage all categories and types of merchants to deploy the card acceptance infrastructure and also facilitate acceptance of small value transactions, it said.
The MDR paid by customers for making payment through credit or debit card is shared between the merchant and the bank. The lowering of MDR for debit cards will encourage customers towards making most of their payments via debit card as they will now have to pay less commission.
Chakrabarty opposes free e-fund transfer
Less than a fortnight after the Finance Ministry asked banks to make electronic fund transfer below Rs 1 lakh free of cost,RBI Deputy Governor K C Chakrabarty on Thursday hes of the view that the plan should not be implemented as it is commercially unviable.
We firmly believe that anything that is free of charges can never be scaled up,it cannot be made robust unless there is commercial viability… he told reporters on the sidelines of the CII-organised banking technology summit here.
Chakrabarty cited the RBI experience when it had made ATM usage free,saying,Anything which is often free in this country is misutilised,we dont understand the value of a product or service, he said,and added that banks should also not charge in an exploitative manner.
