Why abolition of RTGS, NEFT charges may not help the common man much

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Published: June 6, 2019 8:31:59 PM

RBI Monetary Policy: RBI today announced abolition of RTGS and NEFT charges on online transfer of funds, asking the banks to pass on the benefits to customers.

RBI monetary policy, RTGS, NEFT, Fee, Charges, Online Banking, Internet Banking FeeReserve Bank Governor Shaktikanta Das.

RBI Monetary Policy: The Reserve Bank of India’s decision to abolish charges on online transfer of money through RTGS and NEFT may not help the common man much. RBI used to levy these charges on the inter-bank online transfers that have emerged as the preferred mode of payment for businesses, public sector entities and middle class internet banking users. A recipient of RTGS or NEFT fund transfer does not have to pay any charges for receiving the money. However, the person who makes the payment was required to pay a nominal fee.

In case of Real Time Gross Settlement (RTGS) payments, the banks levy between Rs 25 to 50 per transaction depending on the amount. In the case of NEFT payments, there was a nominal fee of Rs 2.50 plus tax for transactions up to Rs 10,000. For amounts between Rs 10,000 and up to Rs 1 lakh, the sender was required to pay Rs 5 plus tax and for the transactions between Rs 1 lakh to Rs 2 lakh, the fee was Rs 15 plus tax and for transactions amount over Rs 2 lakh, the fee was Rs 25 plus tax.

A recipient of RTGS or NEFT fund transfer does not have to pay any charges for receiving the money. However, the remitter was required to pay a certain fee.

However, a careful scrutiny of latest official data will reveal that in terms of the number of transactions, the RTGS transactions accounted for just 7% and NEFT transactions accounted for just 9% of the total number of transactions in 2018-19 which also included the entire gamut of cashless payment systems like UPI, IMPS, ECS, NACH, Paper Clearing, Debit Card and Credit Cards and POS and PPIs (Pre-Paid Instruments) etc.

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However, in terms of value, these 7% RTGS transactions alone accounted for 77% of the value of online or cashless transactions. In case of RTGS transactions, the average transaction size was nearly Rs 90 lakh per transaction in the last financial year. It’s evident that the RTGS is not for common man. The average transaction size of RTGS transactions in the last five years has varied between Rs 70-90 lakh.

Similarly, NEFT transactions accounted for just 9% of the total digital transactions in the last fiscal but in terms of value NEFT payments accounted for 15% of the transaction value of total cashless payments in 2018-19. More importantly, the average transaction size of NEFT payments was one lakh rupees.

NEFT usage has seen unprecedented growth in the last five years as they have grown at a compound growth rate of 26% over the last five years but with the average transaction size of Rs 1 lakh in the last fiscal, it’s clear they are primarily used by businesses and upper middle class.

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While announcing the decision to abolish RTGS and NEFT charges levied by the Reserve Bank, RBI governor Shaktikanta Das also announced that a committee has been set up by the bank to evaluate the entire gamut of ATM charges.

The committee will be headed by the chairman of Indian Banking Association (IBS) and will submit its report within two months from the date of its first meeting.

In fact, rationalisation of ATM charges beyond free usage and Merchant Discount Rates (MDR) on the use of debit and credit cards will help the common man in a big way.

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