Economy
2018
Banking in India
Which of the following best describes the term “Merchant Discount Rate” sometimes seen in news?
C.The charge to a merchant by a bank for accepting payments from his customers through the bank’s debit cards.
A.The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank.
D.The incentive given by the Government to merchants for promoting digital payments by their customers through Point of Sale (PoS) machine and debit cards.
B.The amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services.
Correct Answer: Option C
The Merchant Discount Rate (MDR) is the fee a bank charges a merchant for accepting payments from customers using credit and debit cards.
The MDR compensates the card-issuing bank, the bank providing the Point of Sale (PoS) terminal, and payment gateways (like MasterCard or Visa) for their services.
MDR charges are usually a percentage of the transaction amount and are shared between the bank and the merchant.
Therefore, option c is the correct definition of Merchant Discount Rate.
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