 "Arun Jaitley")
Buy petrol or diesel with your debit or credit card or e-wallet from a petrol pump which has a licence from a public sector unit (PSU), and you will soon get a discount of Rs 7.5 for every transaction of Rs 1,000. You will also not need to pay the two-per cent service tax and merchant discount rate for purchases up to Rs 2,000.
One month since Prime Minister Narendra Modi announced the demonetisation of old series Rs 500 and Rs 1,000 currency notes, Union Finance Minister Arun Jaitley on Thursday announced a number of sops to push for a cashless economy.
He said cashless transactions had increased since November 8. For instance, about 45 million people buy petrol or diesel per day, spending about Rs 1,800 crore, 20% of which is through digital. In November, about 40% transactions at petrol pumps were digital.
Turn
The incentives offered on Thursday could shift at least 30% more to digital. “This would reduce cash requirement of nearly Rs 2 lakh crore per year,” said Jaitley.
There’s more on offer. Though buying insurance from state-owned insurers and railway tickets, digitally, would get sops and discounts. Allaying concerns that these would be withdrawn once the situation normalised, Jaitley said there was no “end date” for these.
Public dealings with the government and PSUs would also be free of transaction fees and MDR charges if done digitally. Bankers, however, feared loss of revenue because of this.
“It will definitely lead to a dent in the income but we will wait for more clarity to see if the government will compensate us for this,” said Ashutosh Khajuria, chief financial officer, Federal Bank.
Other bankers said they hoped what they would lose in value might be gained in volume, and the move might be helpful in the long run.
Currently, 1.98% (in the case of credit card spend) and 0.50-1% (in the case of debit card) of the total amount is charged as interchange fee by banks. This fee is paid by the merchant and is split between the bank that issued the card, lender whose point of sales (PoS) machine is being used and the payment system — RuPay, Visa or MasterCard.
“MDR has several component such as float income, interest income etc. So we need to look at the fine print to understand how this will play out,” said Mrutyunjay Mahapatra, deputy managing director, State Bank of India.
Jaitely said public sector banks have been advised that merchant should not be required to pay more than Rs 100 per month as rental for PoS terminals, ATMs, micro ATMs and mobile PoS. This is aimed at getting smaller merchants on to digital platforms.
Prime Minister Narendra Modi also tweeted 65 million PoS machines have been issued by banks to merchants. “With lower rentals, merchants will install such machines and promote digital transactions,” he said.
Jaitley said as much as 10% and 8% discount will be offered in case of general and life insurance respectively for buying new policy or paying premium online via PSUs websites.
Monthly and seasonal suburban railway tickets purchased through digital mode will get 0.5% discount from January 1.
Nearly 8 million passengers use seasonal or monthly ticket on suburban railways, largely in cash, spending nearly Rs 2,000 crore per year. As more and more passengers shift to digital, the cash requirement may get reduced by Rs 1,000 crore per year in the near future, the finance minister said.
Other decisions would be made effective in two to four days and notified by departments concerned, Jaitley said.
Online booking of railway tickets will get Rs 10 lakh accident insurance. Those using digital mode to pay for railway catering, accommodation, retiring room will be entitled to discount of five%.
Even though long queues continued in front of banks and ATMs, sources said printing of currency notes would not be outsourced.
Naidu panel meet RBI, bank officer to push demonetisation
A high-powered panel to drive demonetisation, led by Andhra Pradesh Chief Minister N Chandrababu Naidu, on Thursday met senior officers of the Reserve Bank of India and bank heads to explore all possibilities.
Naidu said low-hanging fruits such as Aadhar-based payment systems through smart phones and Unified Payment Systems should be explored first. In places where these could not reach for low internet or mobile penetration, card-based payment systems, PoS machines would be tried. He said some amount of cash had to remain in the system, but digital economy is where the future was.
The panel would have another meeting on Friday, following which, an interim report would be submitted to the prime minister, followed by a final report.
NITI Aayog CEO Amitabh Kant said most banks have agreed for interoperability of UPI, while the National Payments Corporation (NPCI) is trying to make USSD code simple.
He said the Aayog has started consultations with district collectors, panchayat heads etc to push for digital payments. The secretary in the ministry of Information and Technology, Aruna S said that there is need to let mobile wallets talk amongst themselves.
On cyber security measures and incidents of card theft etc, Naidu said that such incidents have been tackled with an iron hand and for stray incident, the entire concept cannot be rejected.
Can go online from here
Jaitley said 10% discount will be available on the use of digital mode for paying for RFID or fast-tags for highway toll.
To expand digital payment infrastructure in rural areas, the government, through NABARD will extend financial support to eligible banks for deployment of two PoS devices each in 100,000 villages with population of less than 10,000.
These PoS machines are intended to be deployed at primary cooperative societies, milk societies, agricultural input dealers to facilitate agri-related transactions through digital means. This will benefit farmers of 100,000 villages covering a total population of nearly 750 million who will have facility to transact cashlessly in their villages for their agri needs.
The government through NABARD will also support regional rural banks and cooperative banks to issue “Rupay Kisan Cards” to 43.2 million Kisan Credit Card holders to enable them to make digital transactions at POS machines micro ATMs and ATMs.
“We were using excessive amount of cash and very limited amount of digital transactions till November 8,” he said, adding there is cost of transacting in cash, which has to be borne by economy and political system.
When asked whether the government is also thinking of incentivising digital mode for political donations, Jaitley emphasised that he used the word political system as well when he talked about cost of transacting in cash and that it would inevitably be the future course.
“If it becomes digital, if it becomes smaller donation, if it becomes lesser donation from a larger body of donors it will be a great day for Indian democracy,” he said.
With 76% of the junked currency coming back into the banking system, the finance minister warned that mere depositing of old notes in banks will not change the money from “black to white” and tax liability would remain on unexplained funds.
Nearly Rs 11.85 lakh crore out of the Rs 15.44 lakh crore junked notes are already back into the system.
“I may only clarify that merely depositing money in the bank doesn’t mean that it changes colour from black to white. Its tax liability would still remain because what is unexplained would still remain taxable,” he said.
He said money deposited in banks will be closely scrutinised to establish tax liability.
The zero-balance Jan Dhan bank accounts, opened as part of financial inclusion campaign and to transfer government benefits, including subsidy, directly to beneficiaries, have seen Rs 36,809 crore of deposit in last four weeks even though the amount being deposited is now fast decelerating.
