Surcharge No More, India Encourages Electronic Payments




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India is going digital. Be it the recently launched Digital India campaign where the government of India wants to establish a digital locker for individuals to store the digital documents or the internet connectivity initiative where the government intends to provide a minimum 2 Mbps internet connection to all households. As part of the same initiative, the government has also pushed for increased adoption of digital payments by introducing few reforms in the recent days.

Until now, electronic fiat payments attracted an additional surcharge. The surcharge would range anywhere from 1 percent to 2 percent of the transaction amount. The surcharge was one of the factors that was holding back people from making payments with their credit and debit cards at outlets while buying goods and services. In order to maximize profit by avoiding the surcharge, many small shops used to pass the cost on to the customer by including an additional surcharge to the final bill amount. At the same time, banks waiving off surcharge on card usage used to bear the cost upon themselves.

In the cabinet meeting held late last month, the Government has decided to withdraw all surcharge, service charge and convenience fees that were so far associated with electronic transactions. This move is part of the government’s initiative to reduce cash transactions in order to minimize the operating cost of Reserve bank of India and also to keep track of money flow. By ensuring accountability of transactions, the government will be able to track and penalize tax defaulters and money launderers.

According to the proposal, there will be a maximum cap for cash transactions and any purchases made above that value has to be paid with a card, mobile banking or cheques. It will also minimize the influx and circulation of counterfeit currency as the use of higher denomination banknotes will drastically reduce with the introduction of new electronic payment measures.

Ref: Business Standard

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