As we come a day closer to Union Budget announcement by Finance Minister Arun Jaitley, Payments Council of India (PCI) has charted out its following budget expectations.
Watal Committee Report
PCI wants the government to “review update on” (Editor: Which is it: review or update on?) the Watal committee recommendations for digital Payments in India and accelerate the implementation of the same. The report was brought out to push for a comprehensive overhaul of the regulation of digital payments in India. (Read its list of recommendations here). In June last year, MediaNama also reported about the delay in implementation of the recommendations, and it looks like it will take some more time, if at all. We still have nothing on ensuring interoperability and improving governance at NPCI and addressing the RBI’s lack of neutrality.
100% digital KYC process
The payments council said that even though government and financial sector regulators have allowed digital process like Aadhaar eKYC, digital signature etc, various rules make it compulsory to still take physical documents within a year for KYC or even execute various documents in physical as some regulations and legal requirements make it compulsory to keep physical documents.
It wants government and regulators to show full faith and confidence in 100% digital process and that there should be no additional need to have physical documentation to be obtained additionally in a year.
Minimal processes for using wallets
PCI said that while all commerce transactions are allowed in our country upto Rs 49999 with no process, KYC or any other formality by merchants or payers. For all digital Payments user transactions are allowed even small value with extensive KYC and other processes. It said that digital payments option like wallet should be freely available with minimal process for all transactions below Rs 50000 or cash transactions above Rs 10000 should require KYC. Also, government should consider to provide tax relief to merchants accepting digital payments on overall incremental values especially with annual turnover of Rs 20 lakh as proposes in RBI MDR guidelines.
In October last year, the Reserve bank of India (RBI) had issued revised guidelines on for prepaid payment instruments (PPI) or wallets and said that KYC, Anti-Money Laundering (AML), Combating Financing of Terrorism (CFT) guidelines will apply to wallets, and any new wallets opened will have 12 months to upgrade to full KYC norms. The minimum details for KYC shall include OTP verified mobile number and self-declaration of name, address, gender, date of birth and unique identification number of any of the ‘officially valid document’. And in terms of amount semi-closed wallets with minimum KYC, the RBI has reduced the amount that can be held to Rs 10,000 from the earlier Rs 20,000 (the RBI had raised the limits on wallets following the demonetization of Rs 500 and Rs 1000 notes). And, wallets with full KYC can hold up to Rs 1,00,000. (Read full lowdown of RBI guidelines for wallets here)
Appropriate policies for digital currency and cryptocurrency
PCI said that privately issued digital cryptocurrencies and their trading needs appropriate policies and urgent regulatory framework. Absence of which would result in innocent consumers being cheated and those who are trying to do this as per book would also risk their capital and investment.
It said that its time government takes a serious view and come out with the appropriate laws. For Crypto currency trading SEBI is well placed to manage the market and risks related to the same and for government backed legal tender currency RBI with support of finance ministry can take the lead.
MediaNama’s take: The RBI and SEBI have been trying to shift the onus on each other for regulating bitcoins and other cryptocurrencies as there is confusion whether they would be regulated as a “currency” or a “commodity”.
Also, the ministry of finance recently issued a warning on Bitcoin trading and other virtual currencies which are not backed by a government fiat. It also said that the price of Bitcoin is a matter of speculation and likened the trading of virtual currencies to Ponzi schemes.
Individual tax exemptions
Like categories like travel and rent have benefitted with tax exemptions by government. PCI says that its time to provide for expanding values and category of spends/investment in Life Insurance, Medical Insurance, Mutual Fund with Individual category values to expand the overall user base and to drive financial inclusion beyond banking. Similar, housing sector related benefits to mass middle class and affordable housing category would have multiple benefits.
Creation of Acceptance Development Fund
The year of 2017 has seen a consistent growth of digital payment transaction. However, 30 lakh POS terminals and a few lakh QR codes for a billion plus people says a lot about the scope for building acceptance infrastructure in the country. The upcoming budget must take steps in this direction. One such step would be creation of an acceptance development fund. This is akin to any market development fund set up by new businesses to create awareness and build a repeat-use customer base. On similar lines, acceptance development fund can incentivize merchants, banks, payment processors to enable digital payments at grassroot levels and conduct mass education campaigns to promote awareness and benefits of digital payments.
Incentivize the acquirers
To boost digital payments in India, three essential facets have been activated – a large number of cards have been issued to consumers, acceptance channels have increased with higher POS, QR and UPI penetration and now merchants are aligned to accept cashless payments with the introduction of zero MDR on transactions below Rs 2000 on debit cards, QR and UPI. With Budget 2018, Government can provide some incentives to the acquirers so that these entities can continue to make the investments in the business that are essential to provide the underlying support to the initiatives already taken.
Interoperability for Bank technological assistance
Due to consolidation of banks, technology items like ATM/CDM/Cash recyclers should be done through common procurement like participation of all PSU / Pvt Sector Banks, including IndiaPost Payment Bank and digital infrastructure to be accorded infrastructure status. There should be inter-operability for cash deposit machines/Cash recyclers.
Enhance the allowable tax free value of Employee benefits
PCI says that enhancing the allowable tax-free value of Employee Benefits under the Income Tax Perquisite Rules and linking it to a Consumer Price Index to keep it relevant year after year, would give a boost to the digital and cashless drive and will have a multiplier effect on the economy.