TRAI wants transaction charges to remain low to encourage digital payments

2% credit card transactions charges would encourage an alternative mode of payment.

The Dollar Business Bureau

Transaction charges must be kept at a minimum level to promote digital payment and make it available across the country as India is a cost-sensitive market, Telecom Regulatory Authority of India (TRAI) Chairman R S Sharma said today.

Speaking at a seminar on 'Demonetisation to Digital Remonetisation' organised by FICCI, Sharma said, "There are three things which are extremely important for digital transactions to become ubiquitous - cost, convenience and confidence. India is an extremely cost-sensitive market...You can't have Rs 5 commission on Rs 100 transaction. That is not going to work."

Sharma also urged the financial institutions to imitate the telecom sector where average pre-paid digital recharge value is Rs.10 and said these charges on digital transactions should be based on 'work done' principle.

"My view is that not only in the short run, in the longer run too, if the work done principle is adopted in digital transactions, this whole merchant discount rate (MDR) and other issues will go away. I am not saying that they (banks) should stop earning any money but if they earn money they should earn money in a reasonable manner," he said.

He highlighted that 2% charge on credit card transactions would encourage people to use an alternative mode of transaction, which is cash.

"That thing has to go in the long run if we want cashless to continue...Otherwise there is a danger than once these incentives end, people will revert back to cash, which should not happen. India has to become cashless. I think there is a need to reduce these MDR and other digital charges..." Sharma said.

TRAI has also recommended a Rs.50 crore fine for all 21 circles of Vodafone, barring Jammu and Kashmir, accounting for a total of Rs.1050 crore.

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The Dollar Business Bureau - Dec 20, 2016 12:00 IST