Govt Will Absorb Transaction Fees For Digital Payments In Order To Boost Cashless Economy
In yet another boost to the practice of cashless payments across the country, Government of India has decided to absorb every type of transaction fee incurred while making an online payment to the Govt.
This decision will greatly benefit 60 cr+ debit card and 2.5 cr+ credit card users across India, who can now pay various utility bills pertaining to Govt. departments using their cards or using net banking facility.
Ministry of Finance has even ordered all Govt. departments to formulate a plan for reimbursement of transaction fees, also called Merchant Discount Fee (MDR) via digital medium.
An official statement from the Ministry said, “Government departments shall take appropriate steps to bear MDR cost like other merchants. The public shall not bear any MDR cost for making payment to government through debit cards or credit cards or digital means”
Earlier, Indian Railways, which handles maximum number of online transactions in India, had abolished transaction fees on their online bookings. In February this year, in another boost to cashless economy, Govt. had removed surcharges and service charges on all forms of digital payments.
Considering that 5-7% of our GDP is spent on maintaining and recording currencies, more cashless transactions across the nation will translate into more economic development for us.
And then, there is the issue of black money as well. 90% of the money which is not declared to Income Tax dept. is handled via cash; and by stopping cash based transactions, black money circulation can be stopped effectively. In July, we had reported that Govt. may soon ban all cash based transactions above Rs 3 lakh, and this was hailed as one of the most important anti-black money decision ever.
Cashless Habit Being Promoted All Over By The Govt.
Under Digital India mission, Govt. of India is leaving no stone unturned to promote the habit of cashless transactions within Govt. machinery.
A special task force has already been created under Department of Investment and Public Asset Management (DIPAM) Secretary Neeraj Gupta, whose main task is to encourage various Govt. departments to promote the usage of digital transactions.
Besides, Ministry of Finance has issued a circular to all Govt. departments and collection agencies to spread the message of cashless economy, and ensure that they encourage citizens to pay via online medium only.
Last year, it was reported widely that all Govt. transactions above Rs 1000 would be mandated to be digital based. However, this plan is yet to be implemented. The decision to bear MDR costs of digital payments can be one solid step towards this realization.
There exists some obstacles as well. Not every merchant can afford to absorb MDR costs, which is right now limited to 0.75% for transactions upto Rs 2000 for debit cards; and 1% beyond that. And for credit card transactions, there is no cap.
Govt. will need to reduce this MDR costs for all for boosting cashless economy in the country.