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 ~200, whichever is lower for shops generating revenue up to ~20 lakh. For stores above that bracket, MDR will be at 0.9 per cent or ~1,000, whichever is lower. Currently, MDR is 0.25 per cent for purchases below ~1,000 and 0.5 per cent for those between ~1,000 and ~2,000. “Any merchant whose turnover is more than ~20 lakh will be impacted. Most of the kirana shops have a turnover of more than ~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.