Finance Minister Arun Jaitley on Thursday said the government and the Reserve Bank of India are taking measures to bring down the cost of digital transactions with an aim to move towards a less cash economy.
The government's move to encourage digital transactions as a parallel mechanism will not completely do away with the cash transactions but will help check black money transactions that have reached alarming proportions, Jaitley said, even as he asserted that no amount of digitisation can completely do away with cash transactions.
Chairing the fifth meeting of the consultative committee attached to the ministry of finance on the subject of `Shift to Digital Transactions,' the finance minister said digital transactions are the new parallel mechanism, not a substitute, for cash transactions.
Cash can be gradually substituted to some extent through digital payments / transactions, he said, adding that the government and the RBI are taking various steps to bring down the cost of digital transactions.
He told the participating members of Parliament (MPs) that the government is trying to encourage digitisation as much as possible because an excessive cash economy has its own social and economic costs and consequences.
He specifically mentioned about the 'merchant discount rate' (MDR) charges, which have been brought down significantly in case of transactions up to Rs2,000 made through debit cards, ie, 0.25 per cent in case of transactions below Rs1,000 and 0.50 per cent in case of transactions between Rs1,000 and Rs2,000.
The finance minister mentioned that incentives announced by the government last week relating to discount of 0.75 per cent in case of purchase of petrol / diesel through digital payment has received a very encouraging response from the people. The government has asked central PSUs and oil marketing companies to give incentive by offering a discount at the rate of 0.75 per cent of the sale price to consumers on purchase of petrol/diesel if payment is made through digital means.
The finance minister said that today 55 per cent petrol pumps in the country are accepting payment in digital mode and the force of circumstances and incentives have caused a movement in the digital direction. After 2 December 2016 when the acceptance of old Rs500 notes was withdrawn at petrol pumps, 52 per cent of the payments were made through digital payments.
One MP cited the example of the Bangladesh Bank heist and expressed the concern about cyber security if digitisation is done at such a fast pace. The issue of virtual currency like bitcoins was also raised as they are believed to be used by black money hoarders.
Jaitley said the government is conscious of the need of the cyber security of high level to secure digital payments. He said that the government and RBI are fully aware of cyber security challenges in the move and ensuring strong firewalls around the systems. Keeping in mind that Indian consumer is cost conscious, the finance minister said that the government is providing various incentives for digital transactions, including debit card use.
Regarding connectivity and infrastructure in rural India, suggestions were made to strengthen the institution of business correspondents. Some members raised the concern that Aadhaar alone should not be basis for bank transactions and banks should keep their KYC norms strict along with Aadhaar.
Some members also requested the finance minister to relax conditions for Tamil Nadu in view of recent cyclone that caused major disruptions in supply of electricity and internet connectivity. Suggestions regarding infrastructure for having internet facility on continuous/permanent basis, without disruption, has to be ensured for making digital payments successful especially in sub-urban and rural areas were also made.
Some of them suggested that security measures are required both in case of hardware and software in order to secure the data and transactions made through digital mode. Jaitley assured the members of the committee about cyber security measures being taken by the banks under RBI supervision. He said the government was trying its best to minimise common man's pain.
MPs who attended the meeting include Baijayanta Jai Panda, Dilip Kumar Mansukhlal Gandhi, Ram Charitra Nishad, Subhash Chandra Baheria, Supriya Sadanand Sule, Poonam Mahajan, Sharadkumar Maruti Bansode and Shri Suresh Chanabassappa Angadi (all members of the Lok Sabha).
Digvijaya Singh, Rajeev Chandrasekhar, Ranvijay Singh Judev, Sanjay Seth, Satish Chandra Mishra and Kumari Selja were among the Rajya Sabha MPs.