Digitisation push likely in Budget

To push digitisation and encourage cashless transactions, Finance Minister Arun Jaitley might accept some recommendations of two panels.

One on the subject was a committee of chief ministers to study digital payments, headed by Andhra Pradesh’s Chief Minister N Chandrababu Naidu. The second is headed by a former finance secretary, Ratan Watal.

Some recommendations by the Naidu panel include tax breaks for merchants accepting digital payments and for customers, tax incentives for makers of point-of-sale machines, micro-ATMs and biometric sensors. Interoperability of banks and post offices on Aadhaar-enabled payment systems (AEPS), a new fund for incentivising cashless transactions, levy of banking transaction tax on high-value cash transactions and caps on maximum cash transactions are also there.

The last two points are contentious and Jaitley's Budget might steer clear them. Last week, the finance ministry said no decision had been taken on a banking transaction tax.

Some recommendations of the Watal panel are similar to the Naidu. For instance,making regulation of payments independent of the function of central banking. This can be done by either creating a new regulator or giving more authority to the Board of Regulation and Supervision of Payment and Settlement Systems of the Reserve Bank of India, updating the current Payments and Settlement Systems Act. A new fund to push cashless transactions, implementation of Aadhaar-based Know Your Customer norms, providing disincentives for usage of cash. Also, outsourcing the function of operation of payment systems like Real Time Gross Settlement (RTGS) and National Electronic Fund Transfer (NEFT) and upgrading these to operate 24/7 and allowing non-bank payment system operators direct access to payment systems have also been recommended.

The Watal panel gave its report in December, well in time for the Budget. “The recommendations of these panels have been considered,” said a senior official.

Some recommendations by these panels have already been implemented by the Centre, primarily incentives for digital transactions in government departments, state-owned companies, and ministries.

PROMOTING DIGITAL TRANSACTIONS

• FM may accept some recommendations of the Naidu and Watal panels in the Budget
• Suggestions include tax incentives for merchants, customers’ digital transactions 
• Tax breaks for makers of point-of-sale machines, micro-ATMs 
• Both panels suggest a new fund for the promotion of cashless transactions
• New regulator suggested for monitoring cashless payments
• Recommendations to make banks, private payment systems more interoperatable