Beginning December, online payments through NEFT will be available round-the-clock. As of now, the transfer of funds via NEFT can only be during banks’ working hours. The facility of electronic transfer of funds is available from 8 am to 7 pm on all working days, except the second and the fourth Saturday of the month. While there is no minimum cap on fund transfer through NEFT, the upper limit for transfer is ₹2-5 lakh, depending on the bank.
“The move (by RBI) is a step towards reducing the number of cheques while making payments. Reducing cheque-based payments also increases a business’ efficiency. Earlier, RBI removed NEFT and RTGS (Real Time Gross Settlement System) charges, making such transactions cheaper. This will certainly promote digital payments for business users," Deepak Sharma, chief digital officer, Kotak Mahindra Bank, said.
The Narendra Modi-led National Democratic Alliance (NDA) government’s digital payments agenda got a renewed push after demonetization—the currency scrapping exercise in November 2016. The government and the banking regulator have been trying to incentivize digital payments further, with a vision to make India a ‘less-cash’ society through a bunch of online payment options for individuals.
Last month, RBI had scrapped the levy on online transactions, such as NEFT and RTGS, to make fund transfers cheaper. RBI levies a minimum charge on banks for NEFT- and RTGS-based transactions and banks thereafter pass on the charges to customers.
“As mentioned in the Payment System Vision 2021 document, the Reserve Bank will make available the NEFT system on a 24x7 basis from December 2019. This is expected to revolutionize the retail payments system of the country," RBI said in a release on Wednesday, while announcing its bi-monthly monetary policy. The six-member monetary policy committee on Wednesday lowered its repo rate by an unconventional 35 basis points (bps) to 5.4%.
In 2018-19, 2.3 billion NEFT transactions worth ₹227.93 lakh crore were recorded, according to the central bank.
“The need for extending the availability of NEFT on a 24x7 basis to facilitate beyond the banking hour fund transfer needs would be examined. Need to add more features to NEFT (faster settlements, staggered payments) will also be examined," according to RBI’s Payment System Vision 2021 released in May.
The banking regulator also plans to add other categories of recurring payments through the Bharat Bill Payment System (BBPS) that enables a customer to pay several bills such as telephone, water, gas, direct-to-home (DTH) and electricity at a single location—electronic or physical.
“In order to leverage the advantages of the BBPS and harness its full potential, it has been decided to permit all categories of billers (except prepaid recharges) who provide for recurring bill payments to participate in BBPS on a voluntary basis," RBI said, adding detailed instructions will be issued by the end of September.
BBPS payments can be made using cash, cheques as well as through any digital mode of payment such as internet banking, debit, credit card among others. Bill aggregators and banks function as operating units and carry out these payment transactions for customers.
“Apart from digitization of cash-based bill payments, these segments would also benefit from the standardized bill payment experience for customers, centralized customer grievance redressal mechanism, prescribed customer convenience fee and the like," it said.
“The furtherance of payment reforms is likely to help in faster digitization of the Indian economy and making India a ‘less-cash’ society. Allowing voluntary access to recurring billers is likely to improve customer experience as well as allow billers to innovate on analytics-based payments solutions." Monish Shah, Partner, Deloitte India said.
The central bank also decided to open up to more players to encourage innovation and competition, while minimizing risks in the sector.
It has decided to extend ‘on-tap’ facility to three retail payments systems—Bharat Bill Payment Operating Unit, Trade Receivables Discounting System and White Label ATMs (WLAs) or non-banking entities that have a licence to open ATMs.
“In order to benefit from diversification of risk and also to encourage innovation and competition, it has been decided to offer ‘on tap’ authorisation to entities desirous to function/operate/provide platforms for-Bharat Bill Payment Operating Unit (BBPOU), Trade Receivables Discounting System (TReDS) and White Label ATMs (WLAs)," RBI said.
“Today, non-banks are the backbone for creation of a strong payment ecosystem with more than 50% of the payment flows driving through the payment networks and services provided by these players. With on tap availability of licences for BBPOU and opening up of categories, hope to see more private players entering the fray for different use-cases of recurring billing which should benefit the customers manifold," Dewang Narella, chief executive officer of payment service provider Atom Technologies said.
Also read: RBI Monetary Policy Highlights: Loan EMIs likely to come down after rate cut