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

The correct option is "The charge to a merchant by a bank for accepting payments from his customers through the bank’s debit cards."

What is Merchant Discount Rate (MDR)?
Merchant Discount Rate (MDR) is the fee charged to a merchant by a bank for providing debit and credit card payment processing services. When a customer uses a card (debit or credit) or digital payment facility at a merchant's shop or online platform, the payment gateway/bank collects a small percentage of the transaction amount as MDR.

Key Components of MDR:
1. Interchange Fee: Paid to the bank that issued the debit or credit card.
2. Assessment Fee: Paid to the card network (such as Visa, MasterCard, or RuPay) for processing the transaction.
3. Payment Processor Fee: Retained by the merchant's acquiring bank for facilitating the digital infrastructure.

Why is it important?
MDR ensures that banks and card network providers can maintain payment infrastructure, cover security operational costs, and manage transaction risks while encouraging cashless transactions across businesses.