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No cashback on credit card payment at petrol pumps

PTI     September 25, 2019

From October 1, credit card payments to buy fuel at petrol pumps will not get a 0.75 % discount that State-owned oil companies had introduced more than two-and-a-half years back to promote digital payments.

"Dear SBI credit cardholder, as advised by public sector oil marketing companies, the 0.75 % cashback on fuel transactions will be discontinued with effect from October 1, 2019," the country's largest bank in a text message informed its credit card customers.

The Centre had asked Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) to give a 0.75 % discount on card payments for fuel purchases after a widespread cash crunch in late 2016 following demonetisation of 86 % of currency notes in circulation.

The 0.75 % discount on the value of fuel purchases using credit/debit cards and e-wallets was introduced in December 2016 and had continued for more than two-and-a-half years, straining oil marketing companies (OMCs).

Apart from the cash discounts, the government had also directed OMCs to bear the burden of card payment charges called merchant discount rate (MDR), which is usually paid by the retailer.

An industry official said the oil companies have decided to discontinue the discount on all credit card payments from 1st October. However, the discount on debit card and other digital modes of payments would continue, he said.

The three fuel retailers paid Rs 1,165 crore in e-payment discounts and Rs 266 crore to banks for bearing MDR, totalling 1,431 crore in 2017-18. In 2018-19, the outgo almost touched Rs 2,000 crore.

To stem their cash outgo, the oil companies in August last year reduced the discount for all fleet customers using loyalty programmes from 0.75 % to 0.25 %.

Officials said discounts on debit cards and other modes of digital payments will continue for now.

The 0.75 % discount on payments made using either credit/debit cards, e-wallets or mobile wallets translated into a rebate of about 50 paise a litre on petrol and diesel.

Petrol currently costs Rs 74.13 per litre in Delhi, while a litre of diesel costs Rs 67.07.

Exactly a month after the shock demonetisation of old 500 and 1,000 rupee notes, the government had on December 8, 2016, announced a raft of measures, including discounts on online payments for insurance policies, rail tickets and highway toll charges as the government looked to promote digital cash post the note ban.

At that time it was stated that 4.5 crore consumers buy petrol and diesel worth Rs 1,800 crore daily and in one-month post-demonetisation, digital payments had doubled to 40%.

In December 2017, the government announced that it will bear the MDR charges on transactions up to Rs 2,000 made through debit cards, BHIM UPI or Aadhaar-enabled payment systems to promote digital transactions.

The merchant discount rate (MDR) will be borne by the government for two years with effect from January 1, 2018 by reimbursing the same to the banks, it was announced.

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