Card fees for small merchants likely to be cut by RBI

The Reserve Bank of India (RBI) proposed to drastically cut merchant discount rate (MDR) charges on debit card payments from April 1, with a view to maintain momentum of digital transactions post demonetisation, especially among small merchants. For small merchants with annual turnover of Rs20 lakh and special category merchants, like utilities, insurance, mutual funds, educational institutions and government hospitals, the MDR charge has been proposed at 0.40% of the transaction value.
 
The MDR charge would be even less at 0.3% if the transaction is through digital point of sale (PoS), the RBI said in a draft circular on rationalisation of MDR for debit card transactions. The existing MDR is capped at 0.75% for transactions up to Rs2,000 and 1% for over Rs2,000. However, there is no RBI cap on MDR on credit card payments.
 
Post-demonetisation, the RBI has reduced the charge till March 31. The new charges, as per the RBI draft would come into effect from April 1. The draft also proposes that banks will ensure that all merchants display the signage: “No convenience or service charge is payable by customers“.
 
“Recent developments, including the commitment to greater adoption of digital payments by the government, have given a big boost to migration to non-cash forms of payments. There has been an increase in card transactions (other than at ATMs), and the momentum has to be maintained especially amongst small merchants, who have just begun to accept digital payments,” the RBI said while seeking comments on the draft till an end of this month.

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Changes in Our Business Model
 
 
25th Sept 2020
 
Greetings from Moneylife Advisory Services
 
Between financial years 2019-21, SEBI has come up with extensive changes to investor advisor regulations. On Sep 23, 2020, SEBI had issued new additional guidelines. This comes just two months after extensive changes announced in July 2020. Earlier, in December 2019 there was an ad hoc circular
 
As a result of these changes, IAs, cannot accept fees through credit cards, will have to sign a 26-clause investor agreement, have to maintain physical record written & signed by client, telephone recording, emails, SMS messages and any other legally verifiable record for five years. IAs were already asked to record the suitability and rationale for every piece of advice given, sign them and store them for five years.
 
While these extensive and frequent changes, designed to strengthen the conduct of IAs are well-meaning, these have sharply increased compliance efforts and cost. We, being online advisors, find many of changes harder to implement, compared to advisors working in the physical space. We will have to have an army of advisors, administrative and tech staff to be compliant. If we do this, we will have to divert money to these areas and the cost of our service will double. We want to remain the least-cost service in the market to benefit more and more people. In the circumstances, we are forced to change our business model from “advisory” to “research”. This will mean the following:
 
What remains the same:
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  • We will have to suspend the restructuring tool.
 
What changes:
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Over the next few weeks our site and our communication to you will reflect these and other additional changes.
 
We feel this will not affect you much in terms of what really matters in investing: knowing what to buy and when to buy. This is our edge and it will still be available to you.
 
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Debashis Basu
Founder