Bangladesh Bank (BB) has capped the maximum Merchant Discount Rate (MDR) at one percent, including VAT, for government revenue and fee collection through the Bangla QR payment system. The central bank's Payment Systems Department-2 issued a circular directing that the new rate will apply to all government payments made through the National Payment Switch Bangladesh (NPSB) using Bangla QR.
Objective and Scope
The one percent MDR ceiling will cover transactions made through bank accounts, debit and prepaid cards, credit cards, Mobile Financial Services (MFS) accounts, and Payment Service Provider (PSP) accounts. The move aims to make digital payments for government services more cost-effective and accelerate the expansion of the Bangla QR ecosystem.
Implementation and Promotion
The directive supplements PSD Circular No. 01/2023, issued on February 6, 2023, which fixed payment rates for POS and e-commerce transactions. The latest instruction specifically addresses QR-based government payments. Bangladesh Bank has also allowed acquiring banks and financial institutions to undertake promotional campaigns to encourage greater use of Bangla QR for government fee and revenue payments.
Immediate Effect
The circular instructs all scheduled banks, Mobile Financial Services providers, Payment System Operators, and Payment Service Providers to implement the directive with immediate effect. This new regulation is expected to significantly reduce the cost of digital transactions for government services, making it more accessible to the general public.
Significance and Future Implications
By capping the MDR at one percent, Bangladesh Bank aims to promote the use of digital payments, reduce cash transactions, and enhance financial inclusion. This move is part of the broader goal to digitize the economy and improve the efficiency of government services. The reduction in transaction costs is likely to encourage more individuals and businesses to adopt digital payment methods, fostering a more inclusive and efficient financial ecosystem.
