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Committee on digital payments recommends inclusion of all

10 December 2016

A committee constituted by the government to formulate a roadmap for implementation of a digital payments infrastructure has recommended inclusion of financially and socially excluded groups to boost the digital payment mechanism in the country.

In its final report submitted to finance minister Arun Jaitley on Friday, the committee recommends assimilation of emerging technologies in the market, while safeguarding security of digital transactions and providing level playing to all stakeholders and new players who will enter this new transaction space.

It has suggested inter-operability of the payments system between banks and non-banks, up-gradation of the digital payment infrastructure and institutions and a framework to reward innovations and for leading efforts in enabling digital payments.

''In its report, the committee has  recommended that a medium term strategy for accelerating growth of digital payments in India with a regulatory regime which is favourable to overpass the digital divide by promoting competition, open access and inter-operability in payments'' Finance Ministry said in a statement.

The committee constituted by the ministry of finance under the chairmanship of Ratan P Watal, principal advisor, NITI Aayog and former finance secretary, submitted its final report to the Finance Minister on Friday.

The report recommends inclusion of financially and socially excluded groups and assimilation of emerging technologies in the market, while safeguarding the security of digital transactions.

The committee, which had submitted an interim report on 21 November, had provided a framework for smooth and speedy transition.

The report noted that it is possible to leverage technology to carry out business transactions digitally through online payments, mobile banking, e-wallets, debit cards etc. There are a large number of instruments to move from digital to digi-dhan.

The committee also pointed to the digital economy that Kenya, a developing country in Africa, has made this possible. ''In a country like India where 65 per cent of the population is below 35 years of age, whose IT prowess is well recognised and where even poor and illiterate people exercise their franchise through EVMs, this transformation toward digital economy is definitely possible provided the citizens resolve to do so,'' the report stated.

This, according to the committee, would enable the economy to grow at a faster pace.

''In order to realize this vision, we need to encourage electronic payments and nudge the society to move from digital to digi-dhan. There has been a remarkable increase in both volume and amount of digital payment transactions since  November 8th. However, it is necessary to ensure that electronic payments are adopted by all sections of the society.

''In view of the above, NITI Aayog has requested National Payment Corporation of India (NPCI) to conceptualise and  launch a new scheme to incentivize digital payments. NPCI is a not-for-profit company which is charged with a responsibility of guiding India towards being a cashless society.

The proposed incentives are as follows:

  • All consumers and merchants using digital payments will be eligible;
  • There are two levels of incentives available under the scheme: Weekly lucky draw of the transaction IDs generated in that week, the contours of which are being finalized and a quarterly draw for grand prizes;.
  • While designing the scheme the focus will be on the poor, lower middle class and small businesses;
  • All modes of digital payments viz, USSD, AEPS, UPI and RuPay Cards - will be eligible;
  • For merchants, transactions made on the PoS machines installed at their locations would be considered.
  • The detailed guideline of the scheme will be unveiled soon. However, it would be ensured that all those who have used digital payment systems after November 8th shall be eligible to participate in the scheme.
  • The scheme would also provide for recognition of state governments, their undertakings, districts, urban and rural local bodies who innovate for promoting electronic payment in their respective jurisdictions.

Towards finalisation of the report, the committee said it engaged extensively with all stakeholders and technology groups, including Reserve Bank of India, state governments, Comptroller Auditor General of India, payment companies, technology companies and academia.

The government had constituted the committee on 23 August to review the payment systems in the country and to recommend appropriate measures for encouraging digital payments.

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