A tussle between the banking regulator Reserve Bank of India (RBI) and the banks is on over the issue of continuation of electronic benefit transfer (EBT) scheme, which closed on June 30.

Unhappy over the faulty implementation of the scheme by the banks, the RBI has discontinued the scheme after running it for a couple of years The central bank had discontinued the scheme with the plea that it was intended to be used as an ?early bird incentive? only.

On the other, banks are still hopeful that the scheme will get revived .

The cost of a smart card (used in the EBT) which was issued to the beneficiaries for making government payments like NREGA and social security pension as financial inclusion drive, is shared between the RBI, banks and the respective state governments.

However, the nonchalant attitude as shown by the state governments is said to be the bone of contention.

The cost of one smart card, which is issued by the banks to open no-frills account for the urban and rural poor under their microfinance activities, is Rs 100.

The RBI was contributing half of the cost for the smart card.

Apart from it, all the respective state governments were supposed to shell out 2% to share the cost burden

Surprisingly, except Andhra Pradesh, not a single state government has come forward so far to share the burden.

Talking to FE, a senior official of State Bank of India, said ?We have requested the RBI to extend the scheme until December 31, 2010 as the initial cost for undertaking financial inclusion programme was quite high and has to be shared by the respective state government and the RBI too.?

In a recent interaction with the SBI officials, the Goa government expressed its inability to share the 2% cost of the smart card. It was despite the fact that the state government was ready to pay Rs 35 per smart card, said the SBI official.

An RBI official told FE that the banks and the state governments have not taken advantage of the subsidies offered by RBI on the smart card.

The scheme was an utter failure in states like, Uttar Pradesh, Bihar, Orissa, West Bengal, Assam, Rajasthan and even in Kerala

?Hence at RBI, we are not looking at going for any extension of the scheme,? the official added. Second work on UID project is in full swing at the moment and all such smart cards will have to be replaced by the new ones that are having UID numbers and the existing smart cards will be of no use, added the official.

A senior official of Bank of India said normally it costs Rs 250 for opening of an account under financial inclusion programme and the subsidies coming from the RBI or the state government act as an investment for future benefits and the scheme to continue for at least 2-3 years until the microfinance business became profitable for the banks.