The government of India has been vocal about promoting a less-cash economy since last year in order to curb the circulation of black money as well as for other purposes. Now the government has come forward with a move that will certainly be a positive step towards this agenda. According to current reports, the government has made the decision to bear the transaction cost for all payments made to it through debit or credit cards and net banking. The government began promoting the use of digital payments in the trading fraternity in order to help traders modernize their business operations.
In present times, the cost of transaction, which is commonly known as the Merchant Discount Rate, has to be borne by the customers when a payment is made to the government. According to the statement issued by the Ministry of Finance,“Government departments shall take appropriate steps to bear MDR (Merchant Discount Rate) cost like other merchants. The public shall not bear any MDR cost for making payment to the government through debit cards or credit cards or digital means.”
The statement further added that the process for reimbursement for such payments to arbitrators upon transactions that use debit or credit cards or by any other digital means like Internet Banking is still being worked out. Detailed guidelines along with different modes of operation about the same will be published in due course.
The Ministry of Finance has issued the circular in order to push for the decision to promote debit, credit or digital transactions in government payments and collections. The government had earlier set up a task force under the Department of Investment and Public Asset Management Secretary Neeraj Gupta, which has identified several issues with respective departments of the government on promotion of payments through cards and digital means.
In 2012, the Reserve Bank of India had capped the MDR for debit card transaction at 0.75% for transaction values up to INR 2,000 and at 1% for transaction values above INR 2,000. On credit card payments, however, there was no MDR cap.As of October 2015, there were 61.5 crore debit card users and 2.3 crore credit card holders in the country.