NITI offers rewards in cashless push but changing govt narratives prove digitisation a tall task

New Delhi: The ever changing government narrative after the demonetisation decision on 8 November has once again thrown up an interesting question: Is it mulling imposition of some sort of charge/levy for cash transactions? A senior government official today first said that more and more incentives would be given by the government to push digital transactions so that cash use declines. He then hinted that some internal discussions may take place on putting a charge/levy on cash transactions to make them less attractive than digital payments, before finally retracting and ending with a caveat that these thoughts were all his own, not the government’s.

 NITI offers rewards in cashless push but changing govt narratives prove digitisation a tall task

NITI Aayog CEO Amitabh Kant. Image courtesy PIB

So as of now, there is no clarity if such a move is even being contemplated within the government. But if indeed there is a though, it would be a rather fanciful one since the government’s own estimates show that only 5 percent  of all payments for personal consumption by Indians are done digitally as of now. Imposing a charge on 95 percent  non-digital payments would be quite impractical.

Meanwhile, Finance Minister Arun Jaitley said today that digital transactions were a parallel mechanism, not a substitute for cash transactions. He said this while making his opening remarks at the 5th Meeting of the Consultative Committee attached to the Ministry of Finance. The subject of today’s meeting was “Shift to Digital Transactions”.

So from becoming a cashless society to examining a possible levy on all cash transactions to admitting that digital cannot be the only way to transact – the government narrative changes by the hour. Jaitley also said in his remarks that less cash can be gradually substituted to the possible extent through digital payments/transactions and that the government and the RBI have taken various steps to bring down the cost of digital transactions.

That the government is at its wits’ end with its stated aim of turning India digital overnight is apparent. It must surely be a gradual process. To a question on what kind of redressal mechanism it has devised for problems with digital payment modes like e-wallets, Niti Ayog CEO Amitabh Kant first said the consumer courts will decide these matters before conceding that an alternative method will have to be devised to ensure speedier redressal. He was addressing a presser on the various incentives the government has announced for promoting digital payments through government backed instruments.

To a question over the unpreparedness of the National Payment Corporation of India in handling secure digital payments - it was reportedly recently hacked by Legion – Kant said all digital transactions via government backed instruments were based on two-factor authentication, making them secure. He gave the example of Aadhaar based payments – where even if someone gets to know your Aadhar number, that person cannot misuse the payment gateway since thumb impression or iris scan is still needed for payment to be completed.

Kant read out a host of incentives the government will dole out to citizens making digital payments (and shunning cash) from 25 December this year. There will be daily and weekly cash awards for consumers as well as merchants beginning Christmas Day, provided any of the four government backed payment instruments are used for transactions between Rs 50 - Rs 3,000. The incentives are available on payment by RuPay card, through UPI, through Aadhaar enabled payment systems and through USSD. The caveat is this though: these incentives only apply on people to merchant and people to government transactions, not for people to people or B2B transactions. So you cannot transfer money to an e-wallet, for example, and become part of the bumper prizes being rolled out.

Lucky Grahak Yojana for consumers:

I) Daily reward of Rs 1,000 to be given to 15,000 lucky consumers for a period of 100 days

II) Weekly prizes worth Rs 1 lakh, Rs 10,000 and Rs. 5,000 for consumers who use the alternate modes of digital payments

This will include all forms of transactions viz. UPI, USSD, AEPS and RuPay cards but will for the time being exclude transactions through private credit cards and digital wallets. Bumper prize: 3 mega prizes for consumers worth Rs 1 crore, Rs 50 lakh and Rs 25 lakh for digital transactions between 8 November, 2016 to 13 April, 2017 to be announced on 14 April, 2017

Digi-Dhan Vyapar Yojana for merchants:

1) Prizes for merchants for all digital transactions conducted at merchant establishments

2) Weekly prizes worth Rs. 50,000, Rs 5,000 and Rs. 2,500

3) Mega draw on 14th of April

III) Mega prizes for merchants worth Rs 50 lakh, Rs 25 lakh, Rs 12 lakh for digital transactions between 8 November, 2016 to 13 April, 2017 to be announced on 14 April 2017. Announcing ‘Lucky Grahak Yojana’ and ‘Digi Dhan Vyapar Yojana’, Niti Aayog CEO Amitabh Kant said both the schemes would cover small transactions between Rs. 50 and Rs. 3,000 to encourage every section of society to move to digital payments and the government will spend Rs 340 crore in all for this christmas gift.

Giving details on digital transactions post demonetisation of Rs. 1,000 and old Rs.500 notes, he said PoS transactions witnessed a jump of 95 percent since 8 November (till 7 December). RuPay card transactions were up 316 percent and e-wallet by 271 percent, while both Unified Payments Interface (UPI) and unstructured supplementary service data (USSD) witnessed increase of about 1,200 percent each. All forms of transactions through UPI, USSD, Aadhaar Enabled Payment System (AEPS) and RuPay cards will be eligible for lucky draws, he said.

Meanwhile, Jaitley also outlined the steps taken post demonetisation to encourage digital payments. He specifically mentioned about the MDR (merchant discount rate) charges which have been brought down significantly in case of transactions up to Rs.2,000 made through debit cards i.e. 0.25 percent in case of transactions below Rs. 1000 and 0.50 percent in case of transactions between Rs. 1,000 to Rs. 2,000. The Finance Minister mentioned that incentives announced by the government last week relating to discount of 0.75 percent in case of purchase of petrol/diesel through digital payment has shown a very encouraging response from the people, by and large.

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Updated Date: Dec 15, 2016 19:15:22 IST