New Delhi: With an eye on nudging India faster towards a cashless and ruled-based economy, the government has set up a committee to overhaul the digital payments framework.
The committee has been asked to look for ways for leveraging Aadhaar, a centralised know-your-customer registry incentivising card and digital payments, a single payment interface for government payments and creating a credit history based on digital payments.
The 11-member committee will be headed by former finance secretary Ratan Watal and will have representatives from the Reserve bank of India (RBI), Unique Identification Authority of India (UIDAI), the tax department and various industry bodies in the payments space.
Finance minister Arun Jaitley, in his 2015 budget speech, had first proposed the idea of incentivising electronic transactions. Subsequently in February this year, the Union cabinet had cleared a number of short-term and medium-term measures to push India towards becoming a cashless economy.
The committee, which was notified on 23 August, has been asked to submit its report in a year.
The members of the committee include H R Khan, former deputy governor of RBI, heads of associations like NASSCOM, Internet and Mobile Association of India, Payment Council of India and Indian Banks’ Association and chiefs of the central board of direct taxes and UIDAI.
The terms of reference of the committee include proposing changes in the regulatory mechanism including amendments in the Payments and Settlement System act, the RBI Act, Banking Regulation Act, the Information Technology Act, Telecom Regulatory Authority of India act, Prevention of Money Laundering Act and Income Tax Act.
It has also been asked to suggest measures for incentivising electronic payments through tax rebates and incentives and introduction of cash back and lottery. The committee will also frame rules enabling availing of small loans by borrowers leveraging their card and digital payment history. It will also look into setting up of a single-window payment system wherein all government payments using a card of other electronic payments could be routed through one window.
These steps are part of the National Democratic Alliance and the central bank’s efforts to reduce cash based transactions and check tax evasion. Earlier this week, the unified payments interface--a mobile based payment system went live for customer use. UPI allows customers to transfer money across banks with the use of a virtual address.
Krishnan Dharmarajan, executive director at the Centre for Digital Financial Inclusion, said a one-year term for the committee may be a bit too long as many of the proposals like incentives for cashless transactions are already out in the open.
“It is important to take advantage of the digital payment infrastructure that is being set up like the unified payments interface. A committee is welcome but it should make incremental announcements rather than making all the announcements together to take advantage of productivity and efficiency gains that will accrue," he said.