Watal Panel Suggests Incentives, Regulator For Digital Payment

New Delhi:  Government has suggested a host of fiscal incentives to promote digital transactions and a separate regulator to deal with issues concerning payment.

The 'Committee on Digital Payments', headed by former finance secretary Ratan P Watal, said that the overall objective of the government's digital initiative is to halve the cash to GDP ratio to 6 per cent over the next three years.

Among other things, it suggested withdrawal of all charges levied by government departments and utilities on digital payments and bear the cost of such transactions and mandate government departments and agencies to provide option to consumers to pay digitally.

Besides, there should be incentives for consumers to make payments (including payment of fines and penalties) to government electronically by giving a discount or cashback and enable consumers to make payments (including taxes) to government through suitable digital means like cards and wallets.

Watal, who is presently Principal Advisor, NITI Aayog, also suggested putting a special emphasis on digital payments for recurring low value transactions and reduce custom duties on payments acceptance equipment.

Following submission of the report on December 9, most of the recommendations have already been implemented by the government in its effort to make India a less-cash economy.

"The vision of the Committee is to set a roadmap for digital payments to grow substantially over the next three years.

"An ordinary Indian should have the choice to be able to safely, reliably and conveniently transact money digitally at a price which is affordable and at a place where needed. Over the next three years, it is the vision of the Committee to reduce the cash to GDP ratio from about 12 per cent to 6 per cent over the next 3 years," the panel said in its report.

On making regulation of payments independent from the function of central banking, it said the panel weighed two options on how best this can be implemented.

The first was to create a new payments regulator and the other to make the current Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) within RBI more independent.

"While both the options would serve the intended objective, the Committee recommends that the BPSS be given an independent status which it today lacks by being a sub-committee of the Central Board of RBI," it said. The committee also suggested institution of award to promote digital transaction.

In pursuance of the recommendation, Prime Minister Narendra Modi unveiled two schemes -- Lucky Grahak Yojana and Digi-Dhan Vyapaar Yojana -- for customers and traders alike, to promote mobile banking and e-payments.

Beginning Christmas, 15,000 people started getting rewards through a lucky draw system, whereby each of the winners gets Rs 1,000 credited in their accounts. In the next 100 days, lakhs of families are going to receive crores of rupees as gift if one makes digital payments via mobile banking, e-banking, RuPay card, UPI and USSD.

There is also a grand weekly draw for such customers in which the prize money will be in lakhs of rupees.

On April 14, on the occasion of the birth anniversary of Dr Baba Saheb Ambedkar, there will be a mega bumper draw where rewards will be in crores of rupees.

The panel also suggested creation of a fund proposed as DIPAYAN from savings generated from cashless transactions to expand digital payments.

Suggestions were also given to build audit capability to measure savings with implementation by Finance Ministry, Ministry of Social Justice, Ministry of tribal Affairs and Ministry of Development of North Eastern Region.

It suggested implementation of other measures to promote digital payments including promoting Aadaar-based eKYC and paperless authentication (including where Permanent Account Number has not been obtained) and providing disincentives for usage of cash.

Besides, it said, there is need for creation of awareness and transparency on cost of cash.

There is also a need to consider outsourcing the function of operation of payment systems like Real Time Gross Settlement (RTGS) and National Electronic Fund Transfer (NEFT), it said.

"While moving RTGS to a separate operator is not envisaged for now - a cost benefit analysis may be initiated as an initial step. Over time, multiple payment system operators should be encouraged and payment systems should be operated by market entities," it said.

It also made a case for upgrading payment systems like RTGS and NEFT to operate on 24x7 basis in due course of time. The RBI should progressively increase their timings over due course, it added.

The committee also delved into the scope of integration of all government systems like Public Finance Management System, PayGov, Bharatkosh and eKuber.

The 11-member committee included former RBI Deputy Governor H R Khan, CBDT and UIDAI Chairperson and heads of Indian Banks' Association, Nasscom, Internet and Mobile Association of India.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)