Which one of the following best describes the term "Merchant Discount Rate" sometimes seen in news?

Merchant Discount Rate (MDR) refers to the fee charged to a merchant by a bank for providing debit and credit card payment facilities. It is usually a percentage of the transaction amount that the merchant pays the bank.

A) The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank. (Incorrect)

• As per RBI, Merchant Discount Rate (MDR) is a charge, not an incentive to the merchants.

B) The amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services. (Incorrect)

• Banks do not pay any amount back to customers specifically for using debit cards for purchases as per RBI.

C) The charge to a merchant by a bank for accepting payments from his customers through the bank's debit cards.

• As per RBI notification, MDR is a fee charged to merchants by the bank for providing debit/credit card payment facility when customers use cards to make purchases.

D) The incentive given by the Government to merchants for promoting digital payments by their customers through Point of Sale (PoS) machines and debit cards. (Incorrect)

• MDR is not an incentive by the Government. It is charged by banks.