In a move to promote mobile banking and reduce cash transactions, the Cabinet on Wednesday approved that there should not be any surcharge, service charge and convenience fee to be levied on card and digital payment. Aiming such measures, the Cabinet said that it would create necessary assurance mechanisms for quick resolution of fraudulent transactions and review the payments ecosystem in the country.
Union Cabinet chaired by the Prime Minister Narendra Modi has given its approval for introduction of steps for promotion of payments through cards and digital means. The measures to promote digital or cashless transactions include lowering of merchant discount rate (MDR) on card transactions, mandating payments beyond a prescribed threshold only in card or digital mode, promotion of mobile banking and quick resolution of fraudulent transactions. “Several short-term measures, which will be implemented within one year and medium-term measures within two years, have been approved for implementation by the Government ministries, departments and organizations,” the Government said in a release.
The Government’s decision comes at a time when the banking system, which calls for promoting debit or credit cards and digital payments, will help check the menace of black money.
As cashless transactions have been on the rise in India, they remain modest in comparison to cash payments. “In order to increase digital payments, digital tools and cards should be easy to use and readily available everywhere. Also, they should be accepted without imposing any undue financial burden on the merchant and user and should offer an appropriate level of security,” it said.
While the payment system initiatives taken in the form of electronic clearing service (ECS) scheme, national electronic funds transfer (NEFT), real time gross settlement (TRGS) scheme etc have been impressive, the benefits of modern card as well as digital payment systems are yet to reach all sections of the society and be accepted across the length and breadth of the country. “Current experience and evidence indicates that the penetration and success of modern card and digital payment products and services is concentrated to a large extent in the tier-l and tier-ll locations of the country and mostly to those citizens who have access to the formal banking channels,” it said.
The introduction of the Payment and Settlement Systems Act, 2007 has resulted in deeper acceptance and penetration of modern card and digital payment systems in the country, Aadhaar Enabled Payment Systems (AEPS) has been brought to effect to leverage upon biometric verification and a domestic card network namely, RuPay.
The Reserve Bank of India (RBI) has also recently approved licences for setting up of payments banks with the objective of greater financial inclusion by the payments banks by providing small savings accounts and payments and remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities.