Digital transactions are likely to get a boost and payments through other modes such as cash, demand draft and cheque may come down as the Reserve Bank of India has decided to do away with the charges it levies on fund transfers through RTGS and NEFT routes.

In its statement on developmental and regulatory policies, the RBI emphasised that banks will be required, in turn, to pass on this benefit to their customers.

Operated by the RBI, the Real Time Gross Settlement System (RTGS) is meant for large-value, instantaneous fund transfers above ₹2 lakh and is largely used by trade and industry. It is available on weekdays. The National Electronic Funds Transfer (NEFT) System is used for fund transfers up to ₹2 lakh. The charges for NEFT are in the range of ₹1 to ₹5, and for RTGS, it is between ₹5 and ₹50 at present.

Experts hail the move

Industry players and banking experts have lauded the move by the RBI, saying it will not only boost digital payments in the country but also make transactions faster, safer and cost-effective for millions of small traders and SMEs.

Mandar Agashe, Founder and Vice-President, Sarvatra Technologies, said: “This move will particularly benefit small traders who deal in small-value transactions and and for whom every penny counts. So, this is a great move for the masses and will go a long way in enhancing financial inclusion.” RTGS/NEFT is much cheaper than other payment mechanisms like cheques in terms of the cost involved in managing end-to-end transactions until settlement. The latest RBI move will benefit banks and the entire ecosystem, which will witness an increase in volume of high-value transactions.

Agashe further added that cheques take a lot of time to get cleared and there are high chances of them bouncing due to inadequate balance and signature mismatch.

“Speed and security make RTGS/ NEFT one the highly used mediums of online fund transfer,” said Rustom Irani, MD, Hitachi Payment Services Pvt Ltd.

According to the recent report on deepening digital payments by an RBI committee chaired by Nandan Nilekani, the number of cheque transactions has reduced post demonetisation, and at the same time, RTGS/NEFT has grown substantially.

RTGS usage (in volume terms) has steadily grown with a CAGR of about 11 per cent over the past four years. While the number of transactions is small, the value is large with an average ticket size of ₹70 lakh and ₹90 lakh. NEFT has grown by 26 per cent.

Meanwhile, the usage of cheque has come down drastically in the past five years with a CAGR of -2 per cent, the report added.

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