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6

Question 6

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

AOptions

A
A) The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank.
B
B) The amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services.
C
C) The charge to a merchant by a bank for accepting payments from his customers through the bank's debit cards.
D
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.

BSolution

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.

Diagram for Q6

CStrategy

For economic and financial terms frequently appearing in the news, aim to understand their basic definition and purpose. Focus on who pays whom and for what service. Simple elimination based on this understanding can often lead to the correct answer.

DSyllabus Analysis

This question pertains to the Indian Economy, specifically financial services, digital payments, and banking terminology, often linked to current economic trends.

EQuestion Analysis

Easy. It's a straightforward definition-based question about a common financial term.