1. Narendra Modi government must provide incentives to banks to promote digital transactions; here’s why

Narendra Modi government must provide incentives to banks to promote digital transactions; here’s why

In the budget this year, finance minister Arun Jaitley announced sops in the form of tax rebates and incentives for merchants opting for digital transactions. RBI also came out with reduced MDR charges for digital transactions.

By: | New Delhi | Published: March 8, 2017 4:58 AM
Barring some fumbling—related to MDR on oil—the government has been on the right track thus far on promoting digital transactions.

Barring some fumbling—related to MDR on oil—the government has been on the right track thus far on promoting digital transactions. In the budget this year, finance minister Arun Jaitley announced sops in the form of tax rebates and incentives for merchants opting for digital transactions. RBI also came out with reduced MDR charges for digital transactions. Now, as per The Economic Times, the government is gearing up to give incentives to banks to promote adoption of digital transactions. The government is considering giving banks a 0.25% fee per transaction, capped at R10. So, for every R100 spent via digital mediums, like Aadhaar Pay and BHIM, banks are set to gain 25 paisa, besides the transaction and interchange fees that they usually charge on card or digital transactions.

The move comes in the backdrop of a committee of secretaries calling for an incentive structure for banks to push digital transactions. While the fee may provide the much-needed encouragement, what remains to be seen is if it will be able to offset the loss banks incur from commitment and service charges on PoS machines. In any case, banks are set to benefit from more transactions on digital platform, as that would require less issuance of debit cards. With BHIM looking at over 17 million downloads, but only 7 million active users, this is the kind of thrust that getting a digital economy off the ground needs.

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