Analysts today said the Reserve Bank move to reduce merchant discount rate (MDR) on debit cards is negative for acquiring banks like HDFC Bank and Axis Bank in the short-term as the surge in volumes is unlikely to make up for the losses. “Volume is unlikely to make up for the shortfall in reduction of fees in the short-term and hence, the near-term impact would be marginally negative for a few players like Axis, HDFC, ICICI and SBI,” analysts at domestic brokerage Kotak Securities said in a note. Their peers at American brokerage Morgan Stanley said the move can cause a revenue impact of up to 0.3 per cent on the four lenders and a dip in profitability of up to 1.1 per cent. However, both the notes welcomed the move as being positive, and in the right direction which will help in the long-term.
At present, banks are allowed to charge up to 0.75 per cent as the MDR for transactions up to Rs 2,000 and 1 per cent for other ones. The new guidelines issued yesterday are applicable from January 1, and make a shift in the structure to basing the charges on the size of the merchant. Debit card transactions at merchants with turnover of up to Rs 20 lakh will attract an MDR of 0.40 per cent with a cap of Rs 200 per transaction, while the same at others will be 0.9 per cent with a cap of Rs 1,000.
According to RBI Deputy Governor B P Kanungo, the move is aimed at increasing the stagnant debit card transactions but will also make sure that the acquirers get sufficiently compensated for investing in the infrastructure. It can be noted that earlier this year, economists at the country’s largest lender SBI had come out with a study pegging the overall losses for lenders due to the push on the digital front.