India may give banks an incentive of up to Rs 10 for each transaction to encourage merchants to adopt digital modes of payment, helping achieve the objective of a less-cash economy that makes tax evasion easier to detect.
According to a government official, the proposal is to provide an incentive of 0.25% on the value of a transaction – capped at Rs 10 – made on the biometric-based payment system Aadhaar Pay and UPI platform BHIM.
The incentive is also aimed at encouraging banks to onboard merchants for the new payments ecosystem and build the requisite infrastructure.
The move would also help recoup potential loss of revenue to lenders when buyers use Aadhaar Pay or BHIM instead of debit or credit.
Funds will be made available from the India Inclusion Fund of Nabard and the corpus could be as high as Rs 1000 crore, according to an official.
Deliberations are now on, involving the ministry of electronics and IT and the department of financial services. The Cabinet Secretariat will soon decide on the proposal.
“The committee of secretaries had said that if they (banks) don’t have incentives, they may not go and acquire merchants, so let them have incentives, and merchant will not bear cost and it may be borne from the financial inclusion fund,” the official told ET.
After the impending launch of Aadhaar Pay by banks, including the State Bank of India, the government is also considering a merchant version of the BHIM app that is currently functional for only person to person transactions.
A senior finance ministry official said that although there is no loss of merchant discount rate (MDR) for banks on settlement through BHIM or Aadhaar Pay as they are network agnostic, the plan is intended to promote payments through these.
Source: Times of India