Mumbai: The Reserve Bank of India (RBI) today directed banks not to levy customer charges on transactions through digital payment services up to March 31, 2017.

"As a temporary measure, it has been decided that all banks and Prepaid Payment Instrument (PPI) issuers shall not levy charges on customers for transactions from January 1 to March 31, 2017," said the central bank's Chief General Manager Nanda S Dave in a statement.

The measures apply for transactions on the Immediate Payment Service (IMPS), Unified Payment Interface (UPI) and Unstructured Supplementary Services Data (USSD).

The exemption comes in the wake of the government demonetising the Rs 500 and Rs 1,000 notes on November 8 and aming to provide incentives greater adoption of digital payments by large sections of society.

"In the intervening period, the RBI will facilitate a review of the charges under the payment channels by the stakeholders," said Dave.

In a related development, the central bank has advised banks to cap the Merchant Discount Rates (MDR) for debit card transactions, including payments to the government.

"MDR shall be capped at 0.25 per cent for transactions up to Rs 1,000 and 0.5 per cent for transactions between Rs 1,000-2,000," said Dave.

The measures, however, shall not apply to ATM transactions and will be effective from January 1 to March 31, 2017.

"In the intervening period, the RBI will review the framework for charges on electronic payment transactions in consultations with the stakeholders (banks)," added Dave.

The RBI decision comes a day after the Union Government on Thursday decided to reimburse banks MDR charges on taxes and receipts paid through debit and credit cards in a bid to encourage digital transactions.