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 per cent of which is through digital. In November, about 40 per cent of transactions at petrol pumps were digital.
The incentives offered on Thursday could shift at least 30 per cent 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 Allaying concerns that these would be withdrawn once the situation normalised, Jaitley said there was no “end date” for these.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 per cent (in the case of credit card spend) and 0.50-1 per cent (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 per cent and 8 per cent 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 per cent 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 Lic Online Payment, 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 per cent. 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 Aadhaar-based payment systems through smartphones 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.
Baits to go plastic
Finance Minister Arun Jaitley announced a number of discounts for cashless transactions.
0.75%: Petrol and diesel
10%: New general insurance*
8%: New life insurance*
0.5%: Monthly & seasonal suburban railway tickets
5%: Railway catering, retiring rooms
10%: RFID, or highway toll
Financial benefits for banks to install 2 PoS each in 100,000 villages of population less than 10,000 Merchants not to pay over Rs 1,000 as monthly rent for PoS, mobile PoS, ATMs, micro ATMs Rupay Kisan Cards to 43.2 million Kisan Credit Card holders, to enable them to make digital transactions
Dealings with government or PSUs would be free of transaction charges Credit/debit card dealings up to Rs 2,000 to attract no service tax
Rs 10 lakh accident insurance for those who buy railway tickets online *PSU insurance firms (buying and premium)