Prime Minister Narendra Modi has been pitching for cashless transaction for quite some time now. Even before his much-debated demonetisation order on November 8, PM Modi was seen and heard propagating card payments during his ‘Digital India’ campaign. But a meager-sized part of the population swiped cards for e-payment purpose. The scenario changed drastically after November 8 when long queues outside banks and ATMs forced people to switch to cashless payment mode. The government will reportedly come up with some measures in the upcoming Budget 2017 to make card payments more attractive, lucrative and popular among common people, according to The Indian Express report. Here are the many options on Modi government’s table:
1. Creation of an Acceptance Development Fund (ADF) will encourage wider deployment of card acceptance infrastructure such as Point of Sale terminals (POS). It will enable banks to speed up their merchant acquiring activities and increase penetration in existing and new markets. Contributions to the fund should originate from the card issuers, and card payment networks may also be co-investors in the fund. There could be different methods to determine the level of contribution — as a percentage of card-spend or as a percentage of interchange revenue generated when cards are used, the RBI had said. It will work as a financial pool which can be accessed to address some of the economic constraints associated with acquiring/setting up infrastructure to acquire card payments. This helps to reduce the stress on thin margins and also helps in reducing the payback period of investment for acquirers.
2. A new web facilities may be put in place by the Central Board of Direct Taxes (CBDT) and Central Board of Excise and Customs (CBEC) for consumers to pay taxes and other government payments using debit cards and digital wallets, apart from the net banking facility that is already available. Currently, portals to accept these payments are designed in such a way that only only net-banking facility can be used.
3. The government will also update the Payment and Settlement Mechanism to ensure faster redressal of complaints to protect consumers from any fraud and any financial loss through electronic transactions. With regard to the development fund, sources said the card issuers, banks and the government are expected to contribute to its corpus. This will be used to subsidise the cost of acceptance infrastructure such POS machines. The Finance Ministry has already sought feedback from market participants to start this fund.
4. The government is also considering options to either set up a new payments regulator or to make the current Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) within RBI more independent.
5. The General Financial Rules, 2005 are also likely to be amended in terms that electronic payment modes such as net-banking, cards, wallets, UPI, etc may be added to the traditional payment methods mentioned in the rules such as cheque, demand draft, postal order, fixed deposit, national savings certificate and paper bank guarantee.