Which one of the following best describes the term "Merchant Discount Rate" sometimes seen in news ?
A
The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank.
B
The amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services.
C
The charge to a merchant by a bank for accepting payments from his customers through the bank's debit cards.
Correct Answer
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.
Explanation
The Merchant Discount Rate (MDR) is the fee a merchant pays to a bank for the service of processing payments made by customers via debit or credit cards. Option (D) is the most tempting distractor, but it is incorrect because while the government may subsidize MDR to encourage digital transactions, the term itself refers to the underlying charge rather than the incentive. The core concept tested is the financial mechanism and transaction costs associated with digital payment infrastructure.
Indian EconomyDigital Payments & Banking TerminologyMerchant Discount Rate (MDR)Debit cardsCredit cardsDigital paymentsBanksMerchantsFinancial transactionsPoint of Sale (PoS)