For OMCs, such as Indian Oil, HPCL and BPCL, the burden of MDR comes on top of a 0.75% discount for purchase of petrol and diesel using credit and debit cards and mobile wallets. Photo: Pradeep Gaur/Mint
For OMCs, such as Indian Oil, HPCL and BPCL, the burden of MDR comes on top of a 0.75% discount for purchase of petrol and diesel using credit and debit cards and mobile wallets. Photo: Pradeep Gaur/Mint

Oil firms may have to continue paying higher card transaction fees

While banks fear a lower merchant discount rates would hurt them, oil companies argue a lower MDR on credit and debit card transactions would reduce their financial burden

Mumbai: State-owned fuel marketers will continue paying debit card transaction fees of 0.75% on behalf of their dealers, as banks have refused their request to lower the rate to 0.65%, two officials aware of the development said.

Every establishment accepting cards pays a merchant discount rate (MDR) that goes to the bank which put up the swipe machine, the bank which issued the card, and payment networks like VISA or MasterCard. This fee is not passed on to consumers. Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd which pay MDR on behalf of their dealers, have been pressing banks since February to reduce this to 0.65% to reduce their financial burden.

“We have decided not to push the matter any further. We will pay MDR at 0.75%," said a senior official from one of the oil marketing companies aware of the discussions.

While banks fear a lower MDR would hurt them, OMCs argue a lower MDR would reduce their financial burden. 

Emails sent to IOCL, BPCL and HPCL on 18 April remained unanswered.

On 6 December 2017, the Reserve Bank of India (RBI) tweaked MDR rules to encourage small businesses to accept card payments. For those with annual revenue below Rs20 lakh, MDR would be 0.4% of transaction value or Rs200, whichever is lower. For others, MDR is up to 0.9% of transaction value or Rs1,000, whichever is lower. These charges took effect on 1 January 2018. On 15 December, the government decided to bear MDR on all digital payments up to Rs2,000. 

“RBI had said up to 0.9% of the transaction value. So, we had suggested a 0.65% rate to the banks. They have not agreed and we do not wish to pressurize them any further. We have written to the petroleum ministry regarding the current situation," said the second official cited above, asking not to be named. 

Had the banks agreed to a 0.65% MDR, it would have reduced the financial burden on OMCs by Rs500 crore a month, said the second official quoted above. 

Following demonetization in November 2016, the government had waived MDR at fuel stations till 31 December 2016 to encourage cashless transactions.

For OMCs, the burden of MDR comes on top of a 0.75% discount for purchase of auto fuel using credit and debit cards and e-wallets. The discount scheme was introduced in December 2016.

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