2018 GS Paper I, all questions

UPSC Prelims 2018 · GS Paper I

Question 6: Economy and Social Development

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

aThe incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank.
bThe amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services.
cThe charge to a merchant by a bank for accepting payments from his customers through the bank’s debit cards.
dThe incentive given by the Government to merchants for promoting digital payments by their customers through Point of Sale (PoS) machines and debit cards.

AnswerUPSC’s answer is (c).

Merchant Discount Rate is the fee a merchant pays to its bank for accepting card payments, usually a percentage of the transaction value. The bank shares it with the card network and with the bank that issued the customer's card. It is a cost to the merchant, never an incentive to the merchant or a refund to the customer. Remember: MDR means the merchant pays, which is why the government has capped or waived it for small digital payments.

Why each option is right or wrong
  • (a) Wrong: it is a charge on the merchant, not an incentive paid to the merchant.
  • (b) Wrong: it is not a refund to customers.
  • (c) Right: the fee a bank charges a merchant for accepting debit card payments.
  • (d) Wrong: it is not a government incentive; the merchant pays it.

Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2018, General Studies Paper I, Series A. The paper on upsc.gov.in.