Indian Railways Blocks Six Banks’ Consumers From Card Payments on IRCTC, The Fight Between Banks and Railways Ensued Over Sharing of Merchant Discount Rate

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Indian Railways Blocks Six Banks’ Consumers From Card Payments on IRCTC, The Fight Between Banks and Railways Ensued Over Sharing of Merchant Discount Rate

After the announcement of demonetisation, the Reserve Bank of India capped the limit by banks to charge Merchandise Discount Rate (MDR).

New Delhi, September 22: Miffed after the refusal to share convenience fee, Indian Railways on Thursday reportedly blocked customers of six selected banks for making payments on its ticketing portal, IRCTC. The portal remains one of the busiest websites on the internet. Presently, the cardholders of Indian Overseas Bank, Canara Bank, United Bank of India, Indian Bank, Central Bank of India, HDFC Bank and Axis Bank can make payments for booking tickets and other services of the railways.

As per a report of The Financial Express, the fight ensued after IRCTC demanded half of the convenience fee from the banks for availing its services. Banks alleged they charged fee directly from the customers as IRCTC does not pay them. After demonetisation, IRCTC waived the customers of convenience fee of Rs. 20 but earlier, this year IRCTC had asked the banks to share the fee it charges for card transactions.

Banks charge the merchants for availing the benefits of card payments, popularly known as Merchant Discount Rate. Many banks refused to comply with IRCTC citing the violation of merchant-acquiring business. After the announcement of demonetisation, the Reserve Bank of India capped the limit by banks to charge Merchandise Discount Rate (MDR).

In a circular, RBI stated, “Following the withdrawal of legal tender characteristics of existing ₹ 500/- and ₹ 1000/- Bank Notes (Specified Bank Notes – SBN), in order to facilitate wider acceptance of card payments, the following special measures for debit card transactions (including for payments made to Government), are being introduced for a temporary period:

  1. For transactions upto ₹ 1000/-, MDR shall be capped at 0.25% of the transaction value.
  2. For transactions above ₹ 1000/- and upto ₹ 2000/-, MDR shall be capped at 0.5% of the transaction value.

The measures did not apply to ATM transactions. Further, measures came into effect on January 1, 2017, and remained applicable till March 31, 2017.