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- Merchant Discount Rate (MDR) is the charge (rate) charged by the bank to the merchants for letting the merchants collect payments through swiping of credit and debit cards.
- The merchant discount rate is expressed in percentage of the transaction amount.
- The merchant needs to open an account with the bank.
- The bank then provides the swipe machine. On swiping the cards, the money gets deposited in the account.
- The merchant must agree to the rate before setting up his/her account.
- RBI wants to encourage cashless transactions and so it as set upper limits for the MDR.
- MDR for debit card transaction has been capped at 0.75% for transaction values up to Rs.2000 and at 1% for transaction values above Rs.2000.
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