Bangladesh Bank has capped the merchant discount rate (MDR) for payments made through the Bangla QR system at 1 percent, including VAT, in a move aimed at promoting cashless transactions and reducing payment costs for businesses.

The new directive, issued by the central bank’s Payment Systems Department on Wednesday, took effect immediately.

Under the circular, the 1 percent cap will apply to merchant payments made through the Bangla QR platform under the National Payment Switch Bangladesh (NPSB) using bank accounts, debit and prepaid cards, credit cards, mobile financial services (MFS) such as bKash, Nagad and Rocket, as well as payment service providers (PSPs).

The central bank said the measure is expected to lower the cost of accepting digital payments for small and medium-sized businesses while encouraging consumers to make more cashless purchases.

Previously, the maximum merchant discount rates for point-of-sale (POS), Bangla QR and e-commerce transactions under the NPSB framework were set through a circular issued on February 6, 2015. The latest directive revises only the Bangla QR fee ceiling, leaving all other fees, charges and conditions unchanged.

The circular also allows acquiring banks and payment service providers to offer promotional discounts, charge less than the 1 percent ceiling, or provide cashback incentives to attract merchants and customers.

Bangladesh Bank said the directive came into force immediately and is part of its broader efforts to expand digital payment adoption across the country.