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Promoting digital payments: Same objective, several approaches

Since November 8, Centre has formed three committees to facilitate a smooth transition towards a cashless economy and to prepare a roadmap to boost transparency and financial inclusion.

Written by Pranav Mukul | New Delhi |
Updated: December 13, 2016 12:56:27 pm
digital payments, digital transaction cashless economy, cashless transaction, note ban, economy, arun jaitely, debit card, credit card, demonetisation, tech news, business news A number of other panels within the government have been formed and their reports have been submitted over the past few years. (Illustration: C R Sasikumar)

The Centre’s digital transactions push gained momentum only two weeks into its move to withdraw Rs 500 and Rs 1,000 notes from circulation, with as many as three committees and groups being floated after November 8 to look at ways to impart an impetus to electronic payment tools.

On November 21, a high-level group comprising IT minister Ravi Shankar Prasad and power minister Piyush Goyal met to discuss the ways to fast-track modes of digital payments in the country. This was followed by a panel of secretaries led by Niti Aayog CEO Amitabh Kant being formed on November 24, assigned the task of finding the cost and the minimum time it would take for the changeover to a cashless economy to occur.

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The panel led by Kant comprises IT secretary Aruna Sundararajan and Unique Identification Authority of India (UIDAI) CEO Ajay Pandey. This committee has thus far identified tools for making electronic transactions, and has been holding meetings with state and district-level officials about these tools. However, Kant is also a member on another committee that mainly consists of chief ministers.

On November 30, the Centre announced a 13-member committee of chief ministers that is being headed by Andhra Pradesh Chief Minister N Chandrababu Naidu. Apart from Naidu, Odisha Chief Minister Naveen Patnaik, Madhya Pradesh Chief Minister Shivraj Singh Chouhan, Sikkim Chief Minister Pawan Kumar Chamling, Puducherry Chief Minister V Narayanasamy, Maharashtra Chief Minister Devendra Fadnavis were also named as members of the committee along with Niti Aayog Vice-Chairman Arvind Panagariya, and Kant.

The mandate of this committee, which is soon expected to submit an interim report to the government, was to prepare a roadmap on how to promote digital payment systems to promote transparency and financial inclusion. Whether any of the aforementioned panels have their mandates overlapping with each other was not made clear by the government. This state chief ministers’ panel also has a few special invitees on board including former UIDAI chairman Nandan Nilekani, Boston Consulting Group chairman Janmejaya Sinha, netCORE managing director Rajesh Jain, iSPIRIT co-founder Sharad Sharma and IIM-Ahmedabad professor Jayant Varma.

States such as Haryana have separately taken steps to constitute their own panels to promote digital payments. On December 6, the Haryana government formed an eight-member committee chaired by its chief secretary to oversee implementation and resolve policy issues within the state pertaining to digital payments. The committee consists of the financial commissioner and additional chief secretaries of the departments of revenue, disaster management, transport, printing and stationery, and excise and taxation.

While most of the recently formed committees to ‘promote digital payments’ in the country, are yet to submit their reports and findings to the government, one headed by Niti Aayog member and former finance secretary Ratan Watal, which was formed in August, submitted its report to the finance ministry on December 9.

This committee was initially mandated to submit its report within a year but was asked to advance its task after the Centre started to push digital payments in the backdrop of discontinuing high denomination currency notes. The 11-member committee headed by Watal included former Reserve Bank of India’s deputy governor HR Khan, heads of industry associations such as Nasscom, Internet and Mobile Association of India (IAMAI), Payment Council of India and Indian Banks’ Association and chiefs of the Central Board of Direct Taxes and UIDAI.

The committee in its report suggested interoperability of the various payment platforms between banks and non-banks, upgradation of the digital payment infrastructure and institutions and a framework to reward innovations for leading efforts in enabling digital payments. It also recommended boosting security systems to safeguard the growing digital payment ecosystem in the country.


Even as the panel headed by Watal was formed prior to November 8, it was the first of any existing or past committees to submit report regarding digital payments after the announcement was made.

A number of other panels within the government have been formed and their reports have been submitted over the past few years. Interestingly, none of them had recommended demonetising a large chunk of cash from the economy as a measure to provide an impetus to electronic payment methods.

In February 2012, a task force headed by Nilekani recommended to the government that its institutions should not differentiate between electronic payments and cash, and encourage the use of electronic payments. “Instead of convenience charges, government institutions should offer incentives to people to use electronic payments through all channels — POS (point of sale), internet, and mobile,” the task force report said.

It also suggested that the Centre and the Reserve Bank of India formulated a plan and set targets for reducing the usage of cash in the Indian economy. Additionally, the committee had also recommended that all payments made by government and government institutions above Rs 1,000 should be made electronically.

On December 5, nearly a month after withdrawing 86 per cent of the country’s banknotes in value terms, the finance ministry made it mandatory for all government departments to make payments above Rs 5,000 through electronic payment modes and not cash.

On December 8, exactly a month after announcing the cancellation of legal tender status for Rs 500 and Rs 1,000 currency notes, finance minister Arun Jaitley announced a slew of incentives including a waiver of service tax on digital payments amounting to less than Rs 2,000, discounts on petrol and diesel purchases, suburban railway tickets and insurance policies bought from state-owned insurance companies through electronic means.

On Saturday, Niti Aayog said it asked the National Payments Corporation of India (NPCI) to conceptualise and frame an award scheme to incentivise people using digital mode for making payments through weekly and quarterly luck draws.

In 2015, another committee headed by Nilekani was formed by the Securities and Exchange Board of India to prepare guidelines for online sale of mutual funds.

For a government that abolished various ministerial groups and Cabinet panels “for greater accountability and empowerment”, creating number of committees and groups to deal with one particular overarching issue of digital payments after the lack of infrastructure became a major concern comes as a deviation from its practices.

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