Policy

Centre wants Indians to abandon cash and make digital payments

Our Bureau New Delhi | Updated on January 20, 2018 Published on February 24, 2016

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Various levies on cashless payments set to go

Digital payments, which are already gaining traction in India, could take off if the National Democratic Alliance government’s plan to promote such payments becomes a reality.

The Cabinet on Wednesday gave its nod for several short- (within a year) and medium-term (within two years) measures to be implemented to promote digital and card-based payments in the country.

The measures include withdrawal of surcharge/service charge/ convenience fee on card/ digital payments currently imposed by various government departments/organisations.

Appropriate acceptance infrastructure will be introduced in government departments/ organisations, while the Merchant Discount Rate (MDR) on card transactions will be rationalised, with a differentiated MDR framework for some key transaction segments, an official release said.

The Centre will mandate payments beyond a prescribed threshold only in card/ digital mode.

It will also introduce formulae-linked acceptance infrastructure by the stakeholders of certain card products, rationalise telecom service charges for digital financial transactions, promote mobile banking, and create assurance mechanisms for quick resolution of fraudulent transactions. In addition, it will review the payments ecosystem in the country.

These measures will be instrumental in reducing tax avoidance, and promote migration of government payments and collections to cashless mode.

Ultimately, this is expected to discourage cash transactions by providing access to financial payment services to citizens to conduct transactions through card/ digital means.

While the infrastructure of card/digital payments is growing, it remains modest in comparison to cash payments. For such payments to increase, they should be easy, readily available and accepted, and should not impose an undue financial burden on the merchant or user.

Focus on smaller cities

While payment system initiatives such as the Electronic Clearing Service Scheme, National Electronic Funds Transfer, Real Time Gross Settlement Scheme etc. have been impressive, the benefits of modern digital payment systems are yet to reach all sections of society and be accepted across the country.

Current experience and evidence indicates that the success of modern card/ digital payment products and services is concentrated to a large extent in tier-I and tier-II cities.

Published on February 24, 2016
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