Banks worry govt may not compensate them for waiving digital transaction fees
State-run banks remain sceptical about receiving any compensation from the government because they are yet to receive payments under the DBT programme
State-run banks are unsure whether the government will keep its promise to compensate them for backing its effort to push digital transactions by waiving transaction fees or commissions.
The government had agreed to do this for digital payments at all public sector enterprises and petrol pumps.
“In terms of Office of Controller General of Accounts Office Memorandum dated 14.12.2016, the applicable Merchant Discount Rate (MDR) charges on debit cards for payment up to Rs1 lakh shall be absorbed by the government. In terms of Department of Public Enterprises letter dated 9.12.2016, all Central Public Sector Enterprises (CPSEs) are required to ensure that transaction fees, MDR charges associated with payment through digital means shall not be passed on to the consumers and all such expenses shall be borne by CPSEs," Santosh Kumar Gangwar, minister of state for finance, said in a written reply to a question in Lok Sabha on 3 February.
The merchant discount rate defines the commission kept by banks or credit card companies. For instance, an MDR of 1% means, banks (or credit card companies) get Rs1 for every Rs100 transaction.
State-run banks remain sceptical about receiving any compensation from the government because they are yet to receive payments under the Direct Benefit Transfer (DBT) programme.
The government owes as much as Rs335 crore in commission to public sector banks for transferring subsidies under DBT from April 2016 to January 2017, according to the data compiled by the National Payments Corp. of India.
“The government owes State Bank of India as much as Rs117 crore since January 2015 under the DBT scheme. We have written to the ministry several times," said a senior SBI official on condition of anonymity. “We are not hopeful of government compensating us for the digital initiatives taken like waiving MDR at petrol pumps," the official added. Union Bank and Bank of Baroda too confirmed that they haven’t received payments for facilitating DBT transactions.
Under the DBT programme, the government will have to pay a basic transaction commission of 50 paise, which will be distributed among sponsor banks, destination banks and NPCI. For schemes such as Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), where banks have to ensure last mile disbursements, the government has promised to pay a minimum of Rs5 and a maximum of Rs10 as commission.
DBT, which was rolled out in 2013, has disbursed Rs1,967.27 crore worth of subsidies to nearly 320 million beneficiaries as of December.
The subsidies under 59 different schemes go through a common web-based platform called the Public Finance Management System (PFMS) to different banks, which distributes these funds to beneficiaries.
“DBT scheme coding is currently in progress. A different reporting mechanism is required in transactions where bank delivery is required in remote areas. The compensation for banks will be sorted out soon," said a senior government officer.
Each of the schemes under DBT is in itself a large project, said Krishnan Dharmarajan, Centre for Digital Financial Inclusion. Hence, it will take time to set up a delivery system which is IT-enabled, he added.
Other experts say that banks should not compare the government’s digitization push with DBT. “The digital initiatives taken by the government post the demonetization exercise offer alternative revenue streams for banks. By installing PoS (point of sale) machines at merchant locations, banks should look at different business opportunities," said Vivek Belgavi, partner, financial services–fintech and technology consulting leader, PwC India.
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