New committee swipes towards cashless society

Aims to increase card acceptance infrastructure, fix interchange fee for credit cards

The government and the Reserve Bank of India (RBI) have been working on how to reduce cash transactions in the economy. In this regard, they formed a committee last month, of seven members, chaired by a ministry official, Neeraj Kumar Gupta.

This group is looking at how to ensure the acceptance of card payments is increased. This will require more of point-of-sales (PoS) machines.

RBI data at end-March shows 24.5 million credit cards and 661.8 million debit cards in the country, compared to 1.3 million PoS terminals.

A committee was also formed last year on the same issue; the new panel is to also see that the former’s suggestions are implemented. These include reducing the interchange fee charged on credit cards and bringing these at par with debit cards. Currently, 1.98 per cent in the case of credit card spending and 0.5-1 per cent in debit card spending of the total amount is interchange fee by the bank and the card players.

This amount is paid by the merchant and is split between the bank that issued the card, the lender whose PoS machine is being used and the payment system — RuPay, Visa or MasterCard.

“Most of the merchants fail to distinguish the difference between credit and debit card at the time of swiping it. As a result, they charge a flat two per cent for both debit and credit cards, which has been proving a bit of a deterrent. Therefore, the charges for credit cards have to be brought at parity to change that impression,” said an official, present at the latest meeting of the committee.

The taskforce is also working at ways in which cardpayers needn’t pay a surcharge for fuel, utility bills and railway bookings, a move approved earlier by the government.

India’s cash-to-gross domestic product proportion was a little over 12 per cent in 2014, higher than several other economies. According to a 2015 report, RBI and commercial banks annually spend around Rs 21,000 crore in currency operation costs.