UPSC Prelims 2018·GS1·economy·money and banking

Which one of the following best describes the term "Merchant Discount Rate" sometimes seen in news?

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Last updated 23 May 2026, 3:31 pm IST
  1. AThe incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank.
  2. BThe amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services.
  3. CThe charge to a merchant by a bank for accepting payments from his customers through the bank's debit cards.Correct
  4. DThe incentive given by the Government to merchants for promoting digital payments by their customers through Point of Sale (PoS) machines and debit cards.

Explanation

Merchant Discount Rate (MDR) is a fee charged to a merchant by a bank (or payment service provider) for processing debit and credit card transactions. When a customer uses their card to pay at a merchant's point-of-sale (PoS) terminal or online, a small percentage of the transaction value is deducted as MDR. This charge covers the costs associated with the payment infrastructure, including the issuing bank, the acquiring bank, and the payment network (like Visa, MasterCard, RuPay). Therefore, option C accurately describes the term.
economy: Which one of the following best describes the term "Merchant Discount Rate" sometimes seen in news?
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