Government to ask states to offer cashback on digital transaction fee    

The December 30 demonetisation deadline fast approaching, the Narendra Modi government is devising novel ways to incentivise cashless transactions.

Published: 27th December 2016 01:57 AM  |   Last Updated: 27th December 2016 03:52 AM   |  A+A-


File photo for representational purposes.

Express News Service

NEW DELHI:  The December 30 demonetisation deadline fast approaching, the Narendra Modi government is devising novel ways to incentivise cashless transactions. And it is not just the low internet and smartphone penetration that is weighing heavily on the minds of policymakers; the fee charged in such transactions is also a major bugbear for users.

In a recent meeting held at North Block, top officials promoting the government’s cashless economy mantra have decided to ask state governments to return the transaction fee levied on payments made for utility services. “In the case of utility services provided by the state machinery, the nodal ministries and departments will issue a necessary advisory to the states for providing cash back to customers. The cashback can also be in the form of discounts,” reads the minutes of the meeting reviewed by Express. 

Although the RBI has capped the Merchant Discount Rate  on debit card transactions at 0.5% on transactions up to Rs 2,000 and 0.25% on transaction up to `1,000 on a temporary basis, the challenge is to waive such fees levied from government services immediately. 

A senior government official said that for receiving payment through cards and digital means for the services offered by ministries and departments no convenience fee was being charged. He further said it had already been decided by the cabinet that transaction fees and MDR charges wouldn’t be passed on to users and various measures to promote digital and cashless economy didn’t differentiate between debit and credit card transactions.

“Any remaining MDR charges will be borne by the government. If the ministries and departments still charge transaction or convenience fees they will be waived immediately,” he added. 

And Modi will have a brainstorming session with independent economists and top officials of various ministries at NITI Aayog’s office on Tuesday to hammer out a blueprint to put the economy back on track. 

With NITI Aayog having apparently become the face of the Modi government on the issue of the co-operative federalism with the state governments, the prime minister is, sources said, also keen to assess the extent of job losses in the unorganised and organised sectors due to demonetisation. “The prime minister is particularly concerned as various multilateral agencies and the RBI have lowered the growth projection for the current financial year,” a source said.

The RBI reduced its growth forecast to 7.1 percent from 7.6 per cent in its monetary policy review this month. The Asian Development Bank also lowered its growth projection to 7 percent for the current fiscal from 7.4 per cent. 


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