Cash transactions must be disincentivized, says Niti Aayog CEO Amitabh Kant
Amitabh Kant says maintaining pace of digital transactions, reducing their cost and minimizing technical errors are key challenges in making economy less reliant on cash
- EU finance ministers strike deal on overhaul of banking capital rules
- Big oil consumers start to lock-in prices as Brent urges to $80
- PSU bank recapitalisation plan stumbles as losses mount
- Govt orders out-of-turn coal supply to PSUs, private plants to be hit
- Oil prices fall as Russia floats gradual production increase
New Delhi: Government think tank Niti Aayog on Tuesday said that maintaining the pace of digital transactions, reducing their cost and minimising technical errors remained the key challenges in making the economy less reliant on cash.
A severe shortage of currency notes triggered by the demonetisation of high-value currency notes on 8 November has led to a surge in digital payments in the past 100 days.
“The digital currency should be at par with cash currency and, thus, the need to disincentivize cash transactions is needed. There is a need to have a level playing field so that people can actually choose between cash and digital modes of payments,” said Amitabh Kant, chief executive officer of Niti Aayog, arguing for reduction in the merchant discount rate (MDR) that banks charge on card payments.
The Reserve Bank of India (RBI) last Thursday proposed a system of progressive MDR charges linked to the annual turnover of merchants. Addressing the media here, Kant said Niti Aayog will give its comments on the proposal and that lower MDR charges will support cash-less payments.
The government, however, is yet to decide on a proposal of levying a fee on cash withdrawals above Rs50,000 recommended by committee of chief ministers led by Chandrababu Naidu, the chief minister of Andhra Pradesh.
Dewang Neralla, chief executive officer of Atom Technologies Ltd, a payment service provider, said there could be different cash withdrawal limits for consumers and businesses and accordingly, cash usage should be disincentivized. The government also needs to create a better infrastructure for digital payments.
The chief ministers’ panel had in its 24 January report recommended steps to promote digital payment following the central government’s 8 November decision to discontinue large currency bills. It also suggested that MDR be cut to 30 paise for transactions up to Rs100 and a maximum of Rs10 for transactions above Rs2,000 to encourage payments using debit cards. MDR is the commission paid by merchants to the banks that run the point-of-sale (PoS) machine networks.
Kant said rationalizing MDR rates will give a major fillip to electronic transactions including card payments even at smaller merchant establishments.
Kant said the Bharat Interface for Money, or the BHIM app, has so far been downloaded by over 17 million consumers. The indigenous digital payments application was launched last December.
Noting that the app initially suffered from glitches, he said the level of technical failure has now come down significantly. As a part of Niti Aayog’s two incentive schemes–Lucky Grahak Yojana and Digi Dhan Vyapar Yojana–to promote digital payments, more than Rs153 crore has been disbursed as reward money to over one million consumers and merchants in the last two months.
Editor's Picks »
- Artificial intelligence predictions may not always lead to better decisions
- 2G case: Delhi HC defers hearing on CBI, ED plea against acquittals
- Friday Wrap: ‘Parmanu,’ ‘Solo’ make for dull movie week
- In order to grow, we need to get into other markets: Vince Voron
- IHH extends revised offer for Fortis to 30 June
- Motherson Sumi continues to face margin pressure in foreign markets
- What the Warren Buffett indicator tells us about market valuations today
- Jet Airways lands with a thud in Q4 as fuel costs increase
- IBC amendments: Some dilutions, and a lot more speed
- Patanjali’s gambit is paying off in toothpaste wars