Government wants Railways, banks to cut transaction cost on cards

NEW DELHI: After Air India, the government now wants the Railways to lower transaction charge for online reservations and is also urging banks to cut charges as it seeks to reduce the usage of cash and promote use of plastic money. Reducing the use of cash has been identified as a key priority of the government as it seeks to put curbs on black money. Several steps have already been initiated, which were

expected to be in place during the coming weeks. Recent steps taken by a Prime Minister-appointed Task Force on promotion of payments through cards and digital means have already prompted government departments to bear the transaction cost, commonly known as merchant discount rate (MDR). As part of the plan, Air India has decided to scrap the transaction cost on tickets booked through its websites using cards. Others such as state-run telecom company BSNL have also followed.

In the months ahead, the National Highways Authority of India will offer some a cash back facility for those using a Tag that will help them drive through toll plazas smoothly and help reduce congestion.

The Railways is resisting the change as the Indian Railway Catering and Tourism Corporation (IRCTC) rakes in nearly Rs 600 crore from card transactions. Sources told TOI that the finance ministry is in talks with the Railways and has ur ged it to reduce the cost for rail travellers, especially when the online channel brings down the cost of operation and the pressure at reservation counters."The establishment cost comes down significantly as people use cards," said an official, who did not wish to be identified. Nearly 14 lakh tickets are booked daily on the IRCTC website.

Even petrol pumps pass on the MDR on several credit and debit card-based transactions. The government is also keeping an eye on this practice.

Sources said, banks are being asked to do away with charges levied on electronic transfer of funds at least for a few transactions every month. The government is arguing that three free withdrawals must be allowed from ATMs every month and a similar number of free transactions should be allowed for those using the National Electronic Funds Transfer.