The Ministry of Electronics and Information Technology (MeitY) on Wednesday (October 30) sent a letter to banks and payments firms to increase their digital transactions in the financial year ending March 2020 to 45 Bn (by volume) from 40 Bn.
According to a media report, the Noida-based Paytm Payments Bank and private sector lender HDFC Bank have seen their targets increase the most when compared to all the other banks and financial institutions in India.
Paytm Payments Bank has to meet a target of 1 Bn additional transactions for over 5.9 Bn transactions from the earlier target of 5 Bn, while HDFC Bank’s target has been increased to 3 Bn from 2.5 billion earlier, as reported by TOI.
On the other hand, SBI, ICICI Bank and Axis Bank have seen a minor increase in their overall transaction targets alongside other smaller regional banks.
An official from MeitY stated in the report that some of the banks have reached out to them expressing concerns that the targets need to be relooked on the basis of the scale of operations. However, the government claims to have done the breakdown of electronic transactions among leading platforms after taking into the consideration of total target of 45 Bn.
To further boost digital payments, the government also said in the report that it has requested the banks not to charge merchant discount rate (MDR) on consumers or merchants when the entity receiving payments has a turnover of over INR 50 Cr. For the National Payments Corporation of India (NPCI)-managed UPI, MDR has been limited at INR 100 per transaction. Also, for transactions less than INR 100, MDR was removed from October onwards.
Earlier this year, the government had sent a similar mail targetting 40 Bn digital transaction in the FY, which is a 33% hike from last year’s target of 30 Bn digital payments.
The letter stated that MeitY had set an overall target of 4,019 Cr digital payment transactions for FY20. Of this, a target of 3,411 Cr digital payment transactions is allocated to banks.
In 2017, after the demonetisation of INR 1000 and INR 500 banknotes, the government had set the goal of 25 Bn digital transactions in the country. In MeitY’s 2018 letter to the banks, this target grew to 30 Bn digital transactions in the country by the end of FY19. However, in reality, none of these targets were met.
According to NITI Aayog, India’s digital payments industry is estimated to grow to $1 Tn by 2023, and the value of digital payments is likely to jump from the current 10% to over 25% by 2023.
In October, the government-owned UPI has crossed the 1 Bn transactions, three years after the launch of the payments platform, where it saw a 4.5% growth in comparison to 955.02 Mn transaction in September.