New debit card charges may prompt retailers to push for cash transactions

The increase in debit card fee is set to make retailers push for cash transactions as retailers complain of hefty charges.

The Reserve Bank of India has revised merchant discount rate (MDR) from January next year. For shops up to revenue of Rs 20 lakh per year, MDR will be 0.4 per cent of the purchase value or Rs 200, whichever is lower. 

For stores above that bracket, MDR will be 0.9 per cent or Rs 1,000, whichever is lower. Currently, MDR is 0.25 per cent for purchases below Rs 1,000 and 0.5 per cent for those between Rs 1,000 and Rs 2,000.

"Any merchant who has a business of more than Rs 20 lakh will be impacted. Most of the kiranas have revenues of more than Rs 20 lakh with three-four per cent margin. Why would they pay 0.9 per cent as debit card charges. Obviously, they will push for cash transactions," said Kumar Rajagopalan, chief executive at Retailers Association of India.

"Every merchant, be it a courier company or a travel agency, will be impacted," he said.

Even big retailers are protesting against the change. 

A senior executive at Future Retail said they would instal automated teller machine (ATMs) at stores to let customers withdraw money and do cash transactions. "The charges are quite heavy. We cannot bear it and take a hit on our margins. Passing it to customers will also become a challenge," said the executive.