RBI to reimburse banks MDR charges effective January 1

The Reserve Bank will start reimbursing MDR charges to banks for payments made since January 1 through debit cards by citizens, in line with the government's move to further digital solutions.

In December 2016, the government had decided to absorb the merchant discount rate (MDR) charges in respect of debit card transactions for making payments to it. The move was aimed to encourage people to use digital payments post demonetisation.

"In order to operationalise the (government's direction), the Reserve Bank will reimburse banks MDR on debit cards used for payment of tax and non-tax dues to the government of India with effect from January 1, 2017," the central bank said in a notification.

Banks have been asked to forward their claim for reimbursement of MDR along with statutory auditor's certificate, as in the case of agency commission claims, to RBI's Nagpur office on a quarterly basis.

Also, the banks will have to certify that MDR charges for transaction amounts up to Rs 1 lakh have not been collected from the payer. The banks have been asked to file claim by April 30 for the quarter ending March 2017.