Good news for 61.5 crore debit card users: No transaction charges on debit card payments, says Govt

New Delhi: To encourage widespread usage of digital payments post demonetisation, the government on Wednesday said no transaction charges will be levied on debit cards till December 31.

All public sector banks and some private sector ones have agreed to waive the transaction cost for all payments made through debit cards, Economic Affairs Secretary Shaktikanta Das said. "Public sector banks and some of the private sector banks, and some of the service providers who provide switching services, have agreed to waive the service charges on the use of debit cards up to December 31, 2016," Das said. Here are 5 important points:

• The move comes after the government reviewed the situation post demonetisation of 500 and 1,000 rupee notes and decided to encourage digital payments.
• As of now, Rupay debit cards have already waived the switching charges. Other debit cards which operate international card network companies like Mastercard and Visa, currently charge transaction charges.
• So far, customers bear the transaction cost commonly known as merchant discount rate (MDR) on payments made to the government.
• Das said the intention behind this decision is to ensure greater penetration of digital transactions into our economy and to ensure that more and more people migrate towards digital transactions.
• The Reserve Bank in 2012 had capped the MDR for debit card transaction at 0.75 per cent for transaction values up to Rs 2,000 and at 1 per cent for transaction values above Rs 2,000. However, there is no RBI cap on MDR on credit card payments. In order to move towards 'less-cash' society by developing a card acceptance infrastructure, the RBI had in March came out with a concept paper to encourage card transactions and sought public opinion.

Number of debit card users in India: As of October 2015, there were 61.5 crore debit card users and 2.3 crore credit card holders in the country. The Task Force on promotion of payments through cards and digital means has flagged issues with respective government departments.