In a bid to encourage digital payments in India, the Reserve Bank of India has now removed charges levied for transactions done through Real Time Gross Settlement System (RTGS) and National Electronic Funds Transfer (NEFT).
In its second bi-monthly monetary policy statement, the central bank noted that instructions to banks in this regard will be issued within a week.
“In the area of payment and settlement systems, it has been decided to do away with the charges levied by the Reserve Bank for transactions processed in the RTGS and NEFT systems in order to provide an impetus to digital funds movement. Banks will be required, in turn, to pass these benefits to their customers. Instructions to banks in this regard will be issued within a week,” the circular noted.
Apart from this, the central bank also said that it will set up a committee involving all stakeholders, under the chairmanship of the chief executive officer of Indian Banks’ Association (IBA) who will be responsible for analysing ATM charges and fees.
“The Confederation of All India Traders (CAIT) has welcomed the announcement of RBI today abolishing the bank charges on NEFT & RTGS. It’s a progressive step of RBI which would encourage more usage of digital payments by the business community,” said CAIT secretary general, Praveen Khandelwal. According to him, this move will benefit about 2.5 Cr traders in the country beside industry and other sectors.
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In a bid to accomplish Prime Minister Narendra Modi’s Digital India vision, Khandelwal added that bank charges levied on payments through debit card or credit card should also be waived to encourage the common people to adopt, accept and use card payments for daily usage.
The central bank has also reduced the repo rate, the rate at which it lends money to banks, by 25 basis points.
“RBI has changed stance to accommodative and reduced Repo rate by 25 basis point. Change in repo rate was on the expected line, there has been a drop in 10-year GSEC over last one month and hence transmission is also expected to take place. RBI has been injecting liquidity via OMO and other modes which is also a welcome step,” said Ritesh Jain, cofounder of Flexiloans.
This announcement comes in at a time when the central bank has been taking several measures to elevate the fears among users about digital transactions, including the appointment of an ombudsman for the sector.
Most recently, Nandan Nilekani-led special RBI committee has suggested measures in its report in order to achieve a tenfold increase in per capita digital transactions in three years.
In the report, the RBI panel proposed removal of 18% import duty on point-of-sale (PoS) devices for three years, and also reduce the goods and services tax (GST) on digital transactions to boost acceptance of digital payments among the users.
The committee also noted that various requirements such as ‘Know Your Customer’ (KYC), ‘Customer Due Diligence’ (CDD), ’Anti-Money Laundering’ (AML) to eliminate forms of money laundering has imposed certain costs on the customer, as they must gather various documents, and records in what appears to be an avoidable exercise which is repeated often. In comparison, cash dealing has no KYC requirements, causing users to opt for the latter.
The Ministry Of Electronics and Information Technology (MeitY) has also asked Paytm to support its target of facilitating 40 Bn digital transactions in FY20. The MeitY has also directed the banks to deploy 8.5 Mn PoS terminals across rural areas and the northeastern states.
Thus, it has proposed reducing the “overall” cost to the consumer such as KYC process at multiple stages of the transaction and service charges for digital payments.
Earlier in April, RBI governor Shaktikanta Das had said that the central bank will come up with a regulatory framework of customer-protection measures tailor-made for digital transactions.