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Govt asks banks to reconsider fees for cash transactions to promote digital payments

We had missed this earlier On August 8, the government of India has made certain recommendations in a letter to the Indian Banks' Association (IBA) regarding promotion of digital payments in the country. The letter mentions that the discussion between the government appointed Committee of Secretaries, with participation from the Reserve Bank of India (RBI), the National Payment Corporation of India (NPCI) and major banks, noted that "the cost to banks for servicing transactions was lower for digital transactions than for cash transactions." With this in mind, the recommendations are: (a) Banks may re-examine the charges levied by them on cash handling, withdrawal and deposits, with the objective of incentivising digital transactions over cash transactions. (b) Banks should proactively promote digital transactions and take all necessary steps to make them cheaper for customers than cash transactions. If necessary, cross-subsidisation of low-value digital transactions by high value digital transactions or by cash transactions maybe be considered for this purpose. (c) Banks maybe re-examine the current policy of allowing certain number of free cash transactions, while charging for every digital transaction. (d) Except for the charges prescribed by RBI, banks not charge merchants and customers for debit card, UPI and USSD transactions. (e) The cost of payment acceptance infrastructure not be passed onto merchants by banks and instead, be absorbed by cross-subsidisation with savings from reduction of cash transactions. The government first wrote to IBA on July 5, 2017, and again on August 8, 2017 to find out if any progress had…

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