In order to promote less cash economy and curb the circulation of black money, the government has decided to bear the transaction cost for all payments made to it through debit or credit cards and net banking. At present times, the cost of transaction, which is commonly known as the Merchant Discount Rate (MDR), has to be borne by the customers when a payment is made to the government.
The Finance Ministry has issued the circular in pursuance of the decision of the government to promote credit/digital transactions in government payments and collections. The government has also said that the methodology for reimbursement of such payment to intermediaries on transactions involving debt/credit cards or digital means is being worked out and the detailed guidelines and operational modalities would be issued in due course.
The circular said that government departments shall take appropriate steps to bear MDR (Merchant Discount Rate) cost like other merchants so the public shall not bear any MDR cost for making payment to the government through debit cards or credit cards or 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 Rs 2,000 and at 1% for transaction values above Rs 2,000. However, there is no RBI cap on MDR on credit card payments.
The government had earlier set up a task force under the Department of Investment and Public Asset Management Secretary Neeraj Gupta. The Task Force on promotion of payments through cards and digital means has flagged issues with respective government departments.