New Delhi: The Reserve Bank of India (RBI) has decided to eliminate levy on online payment modes -- Real Time Gross Settlement System (RTGS) and National Electronic Funds Transfer (NEFT) – a move that is expected to make such transactions cheaper.
The banking regulator’s latest decision indicates its larger intention to encourage digital payments and make India an economy that is a less-cash society.
“In order to provide an impetus to digital funds movement, it has been decided to do away with the charges levied by the Reserve Bank for transactions processed in the RTGS and NEFT systems," the banking regulator said in a statement on Thursday.
RTGS is used for real time high-valued transactions and minimum value of such transaction is ₹2 lakh, with no ceiling on the upper limit. There is no minimum cap on funds that can be transferred NEFT, which is an electronic fund transfer system, where transaction is processed in batches. Both the payments modes, however, are not available 24x7 and are dependent on bank working hours.
RBI levies minimum charges on banks for NEFT and RTGS-based transactions. Banks, thereafter, imposes such charges on the customers.
The transaction cost comprises two components—RBI’s charges plus banks’ services charges based on the infrastructure cost they incur. While share of RBI’s levy is expected to go away, bank charges would continue to exist.
The regulator said that banks should now pass on the benefit of doing away of the levy to their customers.
“Instructions to banks in this regard will be issued within a week," RBI said.
“The RBI’s decision (to do away with RTGS and NEFT charges) will reduce the use of cheques and also reduce the cost of processing them. It will also boost digital mode of payments," Deepak Sharma, Chief Digital Officer at Kotak Mahindra Bank said.
Last month RBI had proposed to explore the possibility of making NEFT available 24x7 to facilitate beyond the banking hour fund transfer needs. It had also suggested the need to examine uninterrupted and round-the-clock availability of various payment systems, increasing the maximum transfer limit.
“Need to add more features to NEFT (faster settlements, staggered payments) will also be examined. Reserve Bank of India will also examine the possibility to extend the timings for customer transactions in RTGS based on industry preparedness and customer demand," the regulator had said.
During 2018-19, 2.3 billion NEFT transactions worth ₹227.93 trillion were clocked. In case of RTGS, 136.63 million transactions worth ₹1,715.52 trillion were recorded, RBI data showed.