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Recently on July 1, 2019, the Reserve Bank of India (RBI), waived off all charges on transactions through RTGS and NEFT modes and advised banks to pass on the benefit of the waiver to their customers. This step was taken to boost digital payments and widen the ambit of formal banking channel.

This initiative by the RBI may bring favourable impact in digital payment platform. RTGS, which is one of the preferred tools for making payments and high value transactions of above `2 lakh, is mostly used by businesses for making their daily payments. On the other hand, in case of NEFT, the transactions are processed in batches at different pre-defined time slots. This is unlike other digital tools like IMPS, UPI which are available 24x7. The waiver will encourage small business/ traders/ MSMEs to explore the mode of payment and go digital.

P. Kumar, former Assistant General Manager, City Union Bank opined, "This waiver of RTGS/NEFT charges is a welcome measure for promoting digital banking in India. Often it is found that small and marginal traders aredeprived of formal lending channels because they fail to prove their worth as good customers as they do not have the

documentary evidence of their transactions and cash

flows and in turn they get trapped in the vicious circle

of cash transactions. With this initiative, these traders will be able to create their digital footprint and can gain access to the formal lending channels. Kudos to the Government of India and to the Reserve Bank of India for such proactive measures.”

A five-member committee headed by Nandan Nilekani

was constituted by the RBI earlier this year to submit a comprehensive report to strengthen the digital payment industry. In the report, the committee had recommended several

measures out of which one was to ensure that customers be allowed to initiate and accept a reasonable number of digital transactions with no charges.

Presently, the digital transactions in India is characterised by high value, low volume and high cost transaction. With this recent initiative, it is expected that the pattern will

shift to low value, high volume and low cost transactions which will help in increasing the reach of digital payment

tools. The committee also stated that, apart from increase in digital payments, the reduction in transaction charges

would also help in increasing account balances. The initiative was taken by the RBI after reviewing applicable

charges across all banks for transactions processed in the RTGS and NEFT systems. Along with such initiatives, it is also important to create awareness among customers to avail the benefits of digital banking.

l               Banks need to promote the benefit of waiver of charges to the customers and provide better customer experience to create better relation and increase current account saving account (CASA) balance.

l               As per the Google-BCG market study based on Neilson Consumer Survey 2016, majority of the respondents responded that they prefer digital payment tool because of its one click payment facility, followed by anywhere, anytime facility. From the survey, one can understand that though the waiver of charges in RTGS and NEFT transaction is beneficial to customers but it may lose ground because unlike other digital payment tools, it is time-bound and information like IFSC account, account number and name of beneficiary need to be mentioned to complete the transactions.

l               Mobile-based payment apps are gaining more popularity

over the RTGS and NEFT because mobile penetration is high in India and transactions can be executed in hassle free manner in just one click.

l               In order to reap the maximum of the waiver, it is important that banks should pass on the benefit of waiver to their customers.

Factors such as rise of NPAs, slow credit growth and increase in competition are putting significant pressure in the Net Interest Margin (NIM) of the banks. In order to ensure sustainability, it is important for the banks to

increase their disposable deposit through their CASA balance. Cost effective digital payment channels is one such tool, which is available at the disposal of the banks to rope in maximum CASA.

The Indian government and the RBI have taken several initiatives to boost digital payment in India which include simplified KYC norms, introduction of Aadhar enabled payment system, UPI, BHIM PAY, USSD, digital wallets, and RUPAY Cards. Such measures have provided ample opportunities to the people to make cashless transactions. Apart from different modes of digital payment, the government has also introduced several capacity building and awareness campaigns to boost digital payments. The committee on Digital India has recommended a targeted approach to implement digital payments for citizens across all the e-services of government departments. Several capacity building and awareness programmes like Digishala, an education and non-commercial TV channel on DD free dish to impart knowledge about digital payments, creating awareness about digital finance in rural India through common service centres and Direct Benefit Transfers have been also initiated by the government.

Digitisation of payments in India is gaining momentum. Rapid growth is being witnessed in digital payment transactions in recent years. Several favourable factors like increase in penetration of mobile banking, demographic dividend, favourable regulatory environment, increased access to cost effective internet network and innovative digital tools are contributing to the growth of digitalisation of payments. With customer-friendly measures like reducing the entry barriers by offering cost effective digital channels and developing a favourable ecosystem for conducive and sustainable environment for digitisation, it is expected that the target of Digital India would soon become a reality.

------The author is a banking professional. She is presently working as a faculty at Baroda Apex Academy of Bank of Baroda, Gandhinagar.