Disincentivise cash use, banks tell govt

Banks, under the aegis of Indian Banks Association (IBA), have asked the government to give tax concessions for cashless transactions, and disincentivise cash by imposing a surcharge on cash payments beyond a certain limit.

This, they say, will help all stakeholders to share the costs of turning India cashless and digital.

Arundhati Bhattacharya, chairman, State Bank of India, told DNA Money, "We have been suggesting incentives for non-cash and disincentives for cash transactions for some time now. It is a step in the right direction."

The government is already giving incentives for cashless transactions, but it has not imposed any surcharge on cash transactions.

Petroleum public sector units have been asked to give a discount of 0.75% on the sale of petrol or diesel if payment is made digitally. However, these are temporary measures to tide over cash shortage. Bankers say there should be a permanent process of incentives and disincentives.

Rajeev Rishi, chairman, IBA, and also chairman and managing director, Central Bank of India, told DNA Money, "We have asked the government to consider some concessions for people who go cashless, and have some surcharges for people who pay by cash for large transactions, which would discourage use of cash, fulfilling the government objective of going digital."

A senior banker said, "The government should have some permanent reliefs and impose charges for cash payments, and make it a part of the budgetary provisions. Now, banks are expected to invest in technology and also give up ATM fees and merchant discount rates (MDR), but the expenses cannot solely rest with the banks. The cost needs to be shared by other stakeholders."

Prior to demonetization, bank customers in six metros -- Delhi, Mumbai, Chennai, Kolkata, Hyderabad and Bengaluru -- were allowed to withdraw money free of charge five times a month from the banks where they have their accounts, and every transaction beyond that was charged at the rate of Rs 20 per transaction.

Post demonetization, all ATM transactions, both financial and non-financial, are made free of charge. Although cash withdrawal limit from ATMs has been raised by the Reserve Bank of India (RBI) to Rs 4,500 from the earlier Rs 2,500 on December 30, there is no official communication as far as free-of-charge transaction limit is concerned.

According to December 16 notification, RBI lowered MDR charges on payments made through debit cards to 0.25% for payment up to Rs 1,000 from January 1 to March 31. The MDR for debit card payments, including payments made to the government, will be capped at 0.25% for transactions up to Rs 1,000 and 0.5% between Rs 1,000 and Rs 2,000, RBI had said.

Similarly, it had asked banks and prepaid payment instrument issuers not to levy any charges for transactions up to Rs 1,000 from January 1 to March 31.

Another senior banker said, "If banks have to give up on all these fees, how will it invest in newer technology and install security features, which are essential for making these payments secure."