Retailers unite in outcry against debit card fee hike
09 Dec 2017
An increase in debit card fee to be effected from next year may push retailers towards cash transactions as the charges are quite high, say retailers.
The Reserve Bank of India has revised the merchant discount rate (MDR) from January next year. It will be 0.4 per cent of the purchase value or Rs200, whichever is lower, for shops generating revenue of up to Rs20 lakh. For stores above that bracket, MDR will be at 0.9 per cent or Rs1,000, whichever is lower. Currently, MDR is 0.25 per cent for purchases below Rs1,000 and 0.5 per cent for those between Rs1,000 and Rs2,000.
''Any merchant whose turnover is more than Rs20 lakh will be impacted. Most of the kirana shops have a turnover of more than Rs20 lakh and keep margins of 3 to 4 per cent. Why should they pay 0.9 per cent as debit card charges? Obviously they will push customers for cash transactions,'' Kumar Rajagopalan, chief executive at Retailers Association of India, told Business Standard.
''Every merchant will be impacted,'' he said.
Even big retailers are protesting against the change. A senior executive at Future Retail said they would install ATMs at stores to allow customers to withdraw money and do cash transactions.
''The charges are quite heavy. We cannot bear it and take a hit on our margins. Passing it to customers will also become a challenge.''
In fact according to The Economic Times, over the next few weeks, social media users should be prepared for a barrage of posts on the very commercial-sounding topic of merchant discount rate, which are likely to be accompanied by hash-tags such as #MDR and #debitcards.
Retailers are planning a coordinated campaign on platforms such as Twitter and Facebook to highlight how the latest revision in the charges they pay to enable debit card transactions is an anti-consumer move and one that would benefit banks and card issuers.
They are trying to broad-base their campaign by bringing on board ecommerce companies, airlines and telecom operators, among others, to oppose the changes in the cost of debit card transactions.
"There are repercussions for all merchants," Rajagopalan was cited by ET as saying. The association is trying to rope in "everybody in online space, travel and tourism, hotels, telecom", he said.
Damodar Mall, chief executive officer for grocery at Reliance Retail, set the ball rolling on Friday with a tweet on how the decision could discourage cashless transactions.
"This move contradicts #DigitalIndia that we are all driving. I hope, @NITIAayog will notice the avoidable contradiction. We would like to be encouraged to drive digital payments, not punished! Please, @amitabhk87," he said on Twitter, obviously referring to Amitabh Kant, chief executive of Niti Aayog.
The retailers plan to bombard social media with posts tagging the Prime Minister's Office and the finance, commerce and textile ministers. "We will do a major tamasha on social media," Rajagopalan said.
The group will also petition the finance minister, the Reserve Bank of India and Niti Aayog, the government's think tank.
