Mumbai, Dec 16, 2016: The Reserve Bank of India (RBI) on Friday directed banks not to levy customer charges on transactions through digital payment services up to March 31, 2017.
“As a temporary measure, it has been decided that all banks and Prepaid Payment Instrument (PPI) issuers shall not levy charges on customers for transactions from January 1 to March 31, 2017,” said the central bank’s Chief General Manager Nanda S Dave in a statement.
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The measures apply for transactions on the Immediate Payment Service (IMPS), Unified Payment Interface (UPI) and Unstructured Supplementary Services Data (USSD).
The exemption comes in the wake of the government demonetising the Rs 500 and Rs 1,000 notes on November 8 and aming to provide incentives greater adoption of digital payments by large sections of society.
“In the intervening period, the RBI will facilitate a review of the charges under the payment channels by the stakeholders,” said Dave.
In a related development, the central bank has advised banks to cap the Merchant Discount Rates (MDR) for debit card transactions, including payments to the government.
“MDR shall be capped at 0.25 per cent for transactions up to Rs 1,000 and 0.5 per cent for transactions between Rs 1,000-2,000,” said Dave.
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The measures, however, shall not apply to ATM transactions and will be effective from January 1 to March 31, 2017.
“In the intervening period, the RBI will review the framework for charges on electronic payment transactions in consultations with the stakeholders (banks),” added Dave.
The RBI decision comes a day after the Union Government on Thursday decided to reimburse banks MDR charges on taxes and receipts paid through debit and credit cards in a bid to encourage digital transactions. (IANS)
After the demonetisation of Rs 500 and Rs 1000 notes in 2016 pushed digital payments, Aadhaar-enabled electronic know your customer (eKYC) resulted in an exponential growth of such payments in the country, according to a new report by the Reserve Bank of India.
Transactions in which both the payer and the payee use digital modes to send and receive money are referred to as digital or electronic payments.
India recorded an accelerated growth rate of over 50 per cent in the volume of retail electronic payment transactions in the last four years, said the report titled “Benchmarking India’s Payment Systems”.
The growth in 2018-19 was largely due to the steep growth in Unified Payments Interface (UPI), it added.
“In India, the smartphone revolution has seen an explosion in digital payment options, from e-Money to the Unified Payments Interface (UPI) to a combination of the two. After demonetisation, the use of e-Money picked up on a very large scale,” the findings showed.
The digital landscape changed with higher usage of e-Money, UPI, Aadhaar Payments Bridge System (APBS), RuPay, and Bharat Bill Payment System (BBPS), among others.
With 3,459 million e-Money transactions, India was only behind Japan and the US (data on China not available) in 2017 with respect to volume of e-Money transactions, the report said.
The study revealed that over the years, the number of debit and credit cards also increased considerably in India.
India had 331.60 million and 19.55 million debit and credit cards respectively at the end of 2012. The numbers grew to 861.7 million and 37.49 million respectively at the end of 2017.
By March 31, 2019, the number of debit and credit cards issued were 925 million and 47 million, respectively.
However, the study showed that the cost of digital transactions was a factor inhibiting their growth.
Merchants have to cash out or transfer to their banks accounts at a cost and at times these costs are passed on to the consumer.
“A few countries have tried to regulate costs to ensure that the charges are not usurious, but the jury is still out on whether such a regulation promotes the growth of digital payments. With banks pushing and merchants pulling, it isn’t clear if such caps will discourage the use of cash,” the report added.