Nilekani Recommendations on Digital Payments
- 04 Jun 2019
- 3 min read
RBI appointed committee on digital payments,headed by Nandan Nilekani, has made recommendations for strengthening digital payments ecosystem in India.
- Removal of transaction charges: on digital payments made to government
- There should be no convenience fee on consumers for digital payments made to state run entities and central departments.
- Merchant Discount Rates (MDR) pricing structure: 15 basis points (100 bps = 1% point) cut on the interchange rate on card payments which is borne by the merchants.
- Removal of existing 18 %import duty on POS (point of sale) machines for a period of three years.
- Reduce the goods and services tax (GST) on digital transactions so that the acceptance of digital payments can be improved among the customers.
- Mechanism to monitor the digital payment systems:
- Digital financial inclusion index so that progress in an area can be measured along a common scale, indicating the evolution of the users and steps taken for correcting the imbalance.
- Aggregated information based on blocks and PIN codes, must be available to all players on a monthly basis.
- Reduce the overall cost to the consumers such as KYC (Know your customer) process at multiple stages of the transaction and service charges for digital payments.
- Protection from fraud and risk: payment systems must rely on machine-driven, online dispute resolution systems to handle complaints.
- Setting up an Acceptance development fund: which will be used for developing new merchants in poorly served areas.
- Reduce gap between “digital credits” and “digital debits”: There is a need for improvement on demand or acceptance side of the ecosystem as,high-cost structures, including interchange fees, as well as limited financial service offerings, impede merchants from accepting digital payments.
- Target for additional growth of volume of digital payments by 10 times in three years and the growth will be driven by a shift from high-value, low-volume, high-cost transactions to low-value, high-volume, low-cost transactions.