Tax sops for card transactions, better connectivity vital for rural banking

The Centre should promote digital payments by providing small incentives for both consumers and the business community to promote card transactions in rural regions, said Rishi Gupta, Managing Director, Fino Paytech.

He was speaking at the Budget roundtable organised by BusinessLine in collaboration with Bloomberg in Mumbai on Tuesday.

Incidentally, Fino Paytech and m-Pesa, a subsidiary of Vodafone, have received payment bank licence from the RBI, while Suryoday Microfinance has got permission to operate small finance bank.

“About 1.5 million merchants, largely in the urban areas, accept card payments, but there are 15 million still to be covered. There is a cost of 1-1.5 per cent on merchants to process electronic transaction. Unless they are provided with some tax incentive they will not accept cards,” Gupta said.

The Centre can save on costs by direct benefit transfer and should consider offering some incentive so that the money transferred into the account is used for making electronic payments, Gupta said. Data connectivity still remains a challenge to roll out the Union government’s financial inclusion programme, he said.

Under the Jan Dhan Yojana, 200 million accounts have been opened and the average transactions are ₹2,000-2,500. The next step is to link the account with the Aadhar platform. Already 95 crore Aadhar accounts have been opened. The Centre has already distributed ₹30,000 crore through direct benefit transfer.

Suresh Sethi, Business Head, m-Pesa, said last mile reach is very critical for transforming the huge cash-based economy to the digital form. In a short span of time, m-pesa has managed to create 1 lakh retail touch points against 1.25 lakh bank branches opened in the last so many years.

“Now once we convert cash into digital mode we have to provide an opportunity for the beneficiary to spend the amount in digital form rather than withdrawing cash,” he added.

Umesh Revenkar, Managing Director, Shriram Transport Finance, said the concept of refinancing micro-finance institutions through Micro Units Development Refinance Agency (Mudra) Bank with a corpus of ₹20,000 crore was a big move, but there will be more clarity on beneficiaries once it becomes Act.

Baskar Babu, CEO, Suryoday Microfinance, said while people think microfinance companies over-charge customers, the EMI difference between banks and MFIs on a loan of ₹40,000 is just ₹22-30 and this is largely due to the high cost of funds.

“Our rural customers are willing to pay the cost considering they get the service at their door step with dignity,” he added.

Amit Saxena, CEO, Karvy Finance, said the objective of zero balance Aadhar account opened by banks and penetration in rural regions through opening up of small banks would come unstuck only if they can provide debt capital to people.

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