RBI proposes nil bank transactions charge, low credit card interest rates

Reserve Bank of India (RBI) has given banks the freedom to fix bank service charges for transactions so as to promote cashless transactions, minister of state in the finance ministry Santosh Kumar Gangwar informed the Lok Sabha on Friday.

Although RBI has deregulated interest rates on credit card dues, the rates are determined by banks with the approval of their respective board of directors subject to regulatory guidelines on interest rate on advances issued by RBI from time to time.

RBI also does not maintain information on the rate of commission charged by banks, the minister said.

Meanwhile, he said, the National Bank for Agriculture and Rural Development (Nabard) has approved a scheme for giving 0.5 per cent incentive on payments made through the Aadhaar Enabled Payment System (AEPS) to merchants.

With regards to debit card transactions on PoS devices, between 1 January and 31 March 2017, RBI has capped 'merchant discount rate' (MDR) at 0.25 per cent for transaction value up to Rs1,000, and for debit card transactions value between Rs1,000 and Rs2,000, MDR has been capped at 0.5 per cent.

RBI has decided that till 3 March 2017, banks and prepaid payment instrument issuers will not levy any charges on customers for transactions up to Rs1,000 settled on Immediate Payment Service (IMPS), Unstructured Supplementary Service Data (USSD) and Unified Payments Interface (UPI).

Further, the government has issued a direction to all public sector banks not to charge fees for transactions settled on IMPS and UPI in excess of rates charged for National Electronic Funds Transfer (NEFT) for transactions above Rs1,000, with service tax being charged at actual; for USSD transactions till 3 March 2017 above Rs1,000, a further 50paise discount is provided.

NPCI has waived switching fees for RuPay Card transactions (both for PoS and e-commerce), IMPS, UPI, National Unified USSD Platform (NUUP) and AEPS, with effect from 1 January to 31 March 2017.

Credit card, debit card, charges and other payment card services by banks have been exempted from payment of service tax for transactions of up to Rs2,000. The government has introduced Lucky Grahak Yojana for customers and Digi Dhan Yojana for merchants to promote means of cashless transactions.

As per a a memorandum issued by the Office of the Controller General of Accounts, on 14 December 2016, the applicable Merchant Discount Rate (MDR) charges on debit cards for payment up to Rs1, 00,000 shall be absorbed by the government.

The Department of Public Enterprises in a letter dated 9 December 2016, has asked all central public sector enterprises (CPSEs) to ensure that transaction fees, MDR charges associated with payment through digital means shall not be passed on to the consumers and all such expenses should be borne by CPSEs.

RBI has also cautioned the users, holders and traders of Virtual Currencies (VCs), including Bitcoins about the potential financial, operational, legal customer protection and security related risks that they are exposing themselves to.

The creation, trading or usage of VCs including Bitcoins, as a medium for payment have not been authorised by the Reserve Bank of India.