It is a charge to a merchant by a bank for accepting payment from their customers in credit and debit cards every time a card is used for payments (like swiping) in their stores. The merchant discount rate is expressed in percentage of the transaction amount.
MDR Policy by the RBI
For the time being, the objective of the RBI is to encourage maximum cashless transaction. Aiming this objective, the RBI has brought a policy of setting upper limit for MDR by banks. Here, the Reserve Bank had rationalized the Merchant Discount Rate (MDR) for debit cards with effect from September 2012.
Since then, the MDR for debit card transaction has been capped at 0.75% for transaction values upto Rs.2000 and at 1% for transaction values above Rs.2000.
