Watal committee suggests curbs, nominal levy on cash transaction

Watal committee suggests curbs, nominal levy on cash transaction A nominal levy on high-value cash transactions, monthly, quarterly or yearly limitations on cash transactions are among the recommendations submitted to the finance ministry by the 11-member Committee on Digital Payments headed by Niti Aayog principal advisor Ratan Watal, as measures to disincentivise use of cash in the

system. “The committee recommends that cash transaction should be disincentivised by imposing nominal charges after a certain limit. Additionally, the Committee suggests that consumer payments to government department/utilities can be a good starting point for such handling charges,” the committee’s report said. The report, which was submitted to the finance ministry on December 9, was floated by the ministry for public consultations on Tuesday. On the other hand, to encourage people to use the tools for digital payments, the committee has suggested that all charges levied by government departments and utilities on digital payments should be removed while bearing the cost of such transactions. It has also suggested that government departments and agencies be mandated to provide option to consumers to pay digitally.

The committee also noted that there should be incentives for consumers for making payments, including those for fines and penalties, to government using an electronic mode. This could be done by giving a discount or cashback and enable consumers to make payments (including taxes) to government through suitable digital means like cards and wallets, it said.

However, on the issue of merchant discount rate (MDR), which has been pegged to be a hindrance to incentivising credit and debit card payments, the committee noted in its report that reducing MDR would increase the disincentive to the business and have the opposite effect of slowing down the growth card payment ecosystem.

“The committee is of the view that a market driven MDR is an important element in the business of card infrastructure, including setting up and running the terminals. Capping the MDR reduces this incentive,” according to the report.

“There is no evidence that the rationalisation has resulted in increase in POS (point-of-sale) infrastructure. Thus, the committee believes that there is no merit in further rationalisation,” it added.