New Delhi: Executives representing around 25 banks and prepaid payment instrument providers will meet government officials on Tuesday to discuss how government payments to individuals, businesses and others can be made electronically, at least two people familiar with the development said.

The department of electronics and information technology has invited registered payment agencies such as banks and prepaid payment instrument providers for the industry consultation, one of the people mentioned above said, requesting anonymity. The department, which comes under the ministry of communications and information technology is working closely with the finance ministry on the project to shift payments online, he added.

Deity had recently put up a public draft on shifting government payments online, which closed for public comments on 18 December. The draft, called Electronic Payments and Receipts Framework for Government Departments, had suggested guidelines to facilitate government departments to “expeditiously enable electronic payments and receipts, leveraging all the payment channels". The paper also mentioned two timelines: government departments to facilitate electronic payment systems for all payments and receipts by 31 March 2016, and moving at least 90% of all payments and receipts online by 31 December.

A second person who confirmed the development said banks such as HDFC Bank Ltd and ICICI Bank Ltd, and wallet providers such as Paytm, Oxigen and MobiKwik are among the payment agencies identified and invited for the consultation.

“The department will seek inputs from the industry participants on changes and ideas can be brought in by them to facilitate and move large government organizations to paying through electronic mode. And for that, the government is looking at all possible options available," this person added, requesting anonymity. The person added that right now, there are many government departments which do not have computers; and when they have, their payment systems are often not integrated.

The draft identifies three categories of government departments. Departments in the first category keep paper-based consumer records, billing is done manually and payments are accepted in cash. In the second category, though records are digitized and bills are generated electronically, payment is accepted in cash. Those in the third category have digitized records, electronic bills and payments are accepted through various modes including cash.

According to estimates, the cost of cash transactions is too high and India is pre-dominantly a cash-dependent economy with only around 5% payments being made electronically.

The consultation comes in the background of the government’s push for JAM to boost financial inclusion and move India towards a less-cash economy. JAM is short for Jan Dhan (no-frills bank accounts), Aadhaar and mobile governance.

A third person, requesting anonymity, who works closely with the government on payment infrastructure said the government also needs to change the way it handles cheque payments. “Even though the cheque truncation system (CTS) is in place and all cheques—individuals and businesses—are cleared electronically except that of government between banks to be honoured," this person said. Under CTS, a cheque does not move beyond the first place where it is presented and a picture is sent electronically to the issuing bank in order to be cleared.

The third person added that in conversations with the officials of the Controller General of Accounts over four-five years, it has emerged that moving government cheques to CTS will require amendment in the central treasury rules. “It is defeating the purpose of CTS as each physical cheque clearance costs at least Rs100. Sooner or later, the government needs to change the rules," said the person.

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