Digital payments in India are set to get a big boost with Finance Minister Arun Jaitley, in his Budget 2017 speech, announcing that cash will be no longer allowed for transactions of more than Rs 3 lakh.
The government also proposed a new payments regulator to be set up within the Reserve Bank of India. Jaitley said the government is also working to quickly roll out the recommendations put forward by a committee of chief ministers on digital transactions.
Arun Jaitley, Finance Minister In His Budget Speech To begin with, it is proposed to create a payment regulatory board in the Reserve Bank of India by replacing the existing board of regulations and supervision of payment systems. As we move faster to the path of digital and cheque payments, it is necessary to ensure that payees of dishonoured cheques are able to realise their payments. Therefore, the government is considering the option of amending the Negotiable Instruments Act suitably.
While the government brings about structural changes in payment regulation, it is also promoting digital transactions by proposing and potentially mandating petrol pumps, fertiliser depots, hospitals and colleges to have the option of accepting digital payments, including from the BHIM app.
Jaitley also announced two new schemes targeted at increasing the number of digital transactions through its flagship BHIM app — a referral bonus scheme for individuals and a cash-back scheme for merchants.
Budget 2017 set a target of 2,500 crore digital transactions in the upcoming financial year through various modes such as UPI, Aadhaar Pay and plastic cards.
While the government is yet to roll out Aadhaa- based payment systems — which come with their set of safety concerns — Jaitley said that 20 lakh Aadhaar enabled point-of-sale machines will be rolled out by September 2017.
According to Reserve Bank of India data, the value of debit card transactions at point of sale (PoS) terminals has grown by over 63 percent between 2012 and 2015. Credit card transactions at PoS terminals has grown 54 percent.
However, estimates suggest that 90% of transactions by value are still being carried out in cash in the country. This is set to change with the government’s latest push for digital payments post demonetisation.
In its attempt to boost use of cards, wallets and unified payments interface, the government has announced that banks will deploy 10 lakh additional PoS machines by March 2017 which will be complemented by the launch of Aadhaar Pay, which obviates the need of having a phone, debit card or passwords.