Cashless Economy Current Affairs

Government to bear MDR charges on transactions up to Rs.2000

The Union Cabinet has decided that Government will borne Merchant Discount Rate (MDR) charges on transactions up to Rs. 2,000 made through debit cards, BHIM UPI or Aadhaar-enabled payment systems (AePS) to promote digital transactions. It will be for two years with effect from 1 January, 2018 by reimbursing the same to the banks.

Cost structure of such transactions

A Committee will look into industry cost structure of such transactions which will form basis to determine levels of reimbursement. It will comprise of Secretary Department of Financial Services, Secretary Ministry of Electronics & IT (MeITY) and CEO, National Payment Corporation of India (NPCI). The move will have an impact of Rs 2,512 crore (Rs.1,050 crore in FY 2018-19 and Rs.1,462 crore in FY 2019-20) on the exchequer.


As a result of this approval, consumer and merchant will not suffer any additional burden in form of MDR thereby leading to greater adoption of digital payment modes for such transactions. It will help to move towards less cash economy, since such transactions account for sizeable percentage of transaction volume.

What is Merchant Discount Rate (MDR)?

MDR is charge or fee imposed on merchant by bank for accepting payment from their customers in credit and debit cards every time card is used for payments (like swiping) in their stores. MDR charges are usually shared in pre-agreed proportion between them and are expressed in percentage of transaction amount.

MDR compensates bank issuing card, bank which puts up swiping machine (Point-of-Sale or PoS terminal) and network providers such as Mastercard or Visa for their services. In India, the RBI specifies maximum MDR charges that can be levied on every card transaction.

According to recent RBI notification, from January 1 2018, small merchants (turnover upto Rs.20 lakh) will pay a maximum MDR of 0.40% of bill value and larger merchants (turnover greater than Rs.20 lakh) will shell out 0.90%. RBI has also set monetary cap at Rs.200 per bill for small merchants and Rs.1,000 for large ones. As per RBI rules, merchant has to pay MDR out of his own pocket and cannot pass it on to the customer.


NHAI launches MyFASTag and FASTag Partner mobile apps

The National Highways Authority of India (NHAI) launched two mobile Apps – MyFASTag and FASTag Partner in to facilitate the availability of FASTags for Electronic Toll Collection (ETC) project.

The mobile apps will ease the process, making it possible to buy or recharge FASTags easier using mobile button. 

Key Facts

MyFASTag: It is a consumer application that will facilitate consumer to purchase or recharge FASTags on it. It also helps to keep track of transactions and provides for online grievance redressal.

FASTag Partner: It is a merchant application. It will allow agencies like Common Services Centre (CSC), banking partners and vehicle dealers to sell and enroll FASTag . In addition, it can be also used to activate dormant RFID tags built in 74 lakh cars in the country following the 2013 Gazette Notification in this regard. This application will aid to convert these RFID tags into FASTag (ETC Tag).


NHAI has announced complete rollout of FASTags for ETC on all 371 NHAI toll plazas from 1 September 2017. One lane in every toll plaza will be a dedicated FASTag lane where no other form of payment will be accepted. In order to enable the availability of FASTags for ETC, NHAI has taken two steps in consultation with Reserve Bank of India (RBI) and National Payments Corporation of India (NPCI). They are online and offline sale of sale of FASTags through Common Services Centre (CSC) near toll plazas. Even FASTags can now be purchased online from Issuer Banks websites, NHAI website and will be delivered by courier at the door step of the purchaser.

Electronic Toll Collection (ETC)

It is electronic payment system on highway tolls that does not have human involvement. ETC systems use vehicle-to-roadside communication technologies to perform an electronic monetary transaction between vehicle and toll collection agency. It aims to make travel more convenient, faster and environment friendly for people.


FASTag is a radio frequency identification device that enables cashless transaction at toll plazas without stopping the vehicle at the toll plazas. It employs RFID technology for making toll payments directly from the pre-paid account linked to it. This system aims to remove logistic inefficiencies at toll plazas and has the potential of saving Rs 60,000 crore in terms of time and fuel bills.