New debit card charges may push retailers back to cash transactions

Increased debit card fee may push retailers towards cash transactions as the charges are quite high, said retailers.


The Reserve Bank of India has revised merchant discount rate (MDR) from January next year.  MDR will be 0.4 per cent of the purchase value or Rs 200, whichever is lower for shops generating revenue up to Rs 20 lakh. For stores above that bracket, MDR will be at 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 whose turnover is more than Rs 20 lakh will be impacted. Most of the kirana shops have a turnover of more than Rs 20 lakh and keep margins of 3 to 4 per cent. Why would they pay 0.9 per cent as debit card charges. Obviously they will push customers for cash transactions,” said Kumar Rajagopalan, chief executive at Retailers Association of India.


“Every merchant, will be impacted,” he said. Even big retailers are protesting against the change. A senior executive at Future Retail said they would install ATMs at stores to allow customers to withdraw money and do cash transactions.” “The charges are quite heavy. We can not bear it and take a hit on our margins. Passing it to customers will also become a challenge,” said the executive.

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