Govt to push for cashless economy

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To facilitate cashless payments, government has exempted imported Point of Sales machines from mandatory BISlabelling till March 31 to expedite their shipments. The ministry of electronics and IT has given nod to a proposal of finance ministry “to allow the import of nonlabelled BIS registered Point of Sales terminals” complying to certain conditions.

The merchant will be given clearance for import if he presents valid registration number issued by BIS for particular model of PoS being imported along with manufacturer’s details. Also, the merchant will need to label products at the port before the release of consignment.

“In order to facilitate the implementation of cashless digital payment and to allow the import of nonlabelled BIS registered PoS terminals, this ministry has granted special exemption till March 31, 2017 for import of nonlabelled PoS terminals,” MEITY said in its letter to the excise and customs department.

The letter said that ministry of finance had requested MEITY to provide special exemption to PoS machines as they are being imported in country to promote cashless and digital payments ecosystem.

An SBI research report said that the country has 15.1 lakh PoS machines but may need an additional 20 lakh more if digitisation has to gain traction.

As per rules, it is mandatory for PoS machines that are imported in the country to BIS certification and accordingly bear BIS standard logo for clearance at Indian customs for sale in the country. BIS is implementing agency. Customs department allows import of goods covered under it as per direction of MEITY and BIS.

Meanwhile, the highprofile committee of chief ministers led by Chandrababu Naidu tasked with finding ways of boosting digital payments has urged the Reserve Bank of India to slash card transaction charges to help wean Indians away from cash. The Niti Aayog has forwarded the proposal, mooted by committee member Nandan Nilekani, to the central bank.

“The chief ministers’ committee is in agreement that on account of the massive push towards a digital economy, financial transactions are moving from an era of low volume, high value to an era of high volume, low value,” Niti Aayog CEO Amitabh Kant wrote in a note to RBI Governor Urjit Patel.

The proposal is in line with the central government’s push to boost digital transactions as part of efforts to shift to a cashless economy in the wake of demonetisation.

The panel has suggested that the merchant deposit rate (MDR) be cut to 30 paise for transactions up to Rs 100 and a maximum of Rs 10 for transactions above Rs 2,000 to encourage payments using debit and credit cards. MDR is the commission paid by merchants to the banks that run the pointofsale (PoS) machine networks.

Since 2012, RBI has capped MDR for debit card transactions up to Rs 2,000 at 0.75% and at 1% for all transactions above Rs 2,000. MDR on credit cards is not capped and can go up to 2.5%. “On account of this transition, transaction fee or MDR has to be substantially lower,” the note said. “Volume growth will more than make up for lower transaction fees, since the marginal cost of transaction is very low.” The rise in volume could lead to a fourfold increase in MDR revenue, it’s estimated.

The committee constituted by the Centre had asked Nilekani to prepare a paper on realigning transaction fees. As per the structure proposed by Nilekani, total MDR on transactions through cards and pointofsale (PoS) machines should be 0.5% for purchases below Rs 100 to cover utility costs and a maximum of Rs 10 for higher transactions to facilitate larger ticket transactions. It has proposed MDR of 0.3% or Rs 6 for transactions through the unified payment interface (UPI) — an online payments platform — and 0.51% of transactions at microATMs.

Besides, it has recommended RBI consider imposing a 2% cap on credit card MDR to discourage the practice of composite MDR, which is often more than 1%.

The committee has asked RBI to implement the changes under Section 18 of the Payments & Settlements System Act, 2007, in a manner that will encourage the shift to digital while safeguarding the interests of banks.

A sizeable portion of the MDR goes toward paying interchange fees by the cardissuing bank and a part of it to payment service providers such as Visa, MasterCard or National Payments Corp of India (NPCI) for RuPay cards.