The Nandan Nilekani committee set up by the Reserve Bank of India has proposed a National Common Mobility Card (NCMC) which could be used at all transit locations making all new metro and transit payments interoperable through NCMC. The five-member committee has also proposed a host of measures, including all the payments by the government to citizens through the digital mode, to reduce cash transactions in the country.
“The card (NCMC) has two instruments on it – a regular debit card which can be used at an ATM, and a local wallet (stored value account), which can be used for contactless payments, without the need to go back to the server or additional authentication. It is envisioned that a single card will be usable for all local travel needs across the country,” the High Level Committee on Deepening of Digital Payments, headed by former UIDAI Chairman Nilekani, said in its report.
“For rapid expansion of the acceptance network, all bus, train, metro services must be enabled to accept these payments. The government may subsidize this one-time cost,” it said. On the issuance side, many of the existing debit cards will have to be upgraded to support this standard. This can be done on customer demand, or through the regular card replacement cycle. “It is also possible that mobile phones may include NFC technology, and drop the need for a card,” the panel said.
In a significant proposal, the committee has recommended that the government must ensure that all pay-outs must be done through digital means. This includes: salaries, pensions, Direct Benefits Transfer (DBT) and payments for goods and services procured. The committee said while various departments in Centre and State Governments have already digitised flow of funds and receipts till beneficiary departments, pay-outs from such departments on account of expenditures incurred were not completely digital. “The thresholds for small value cash payments should also be reduced drastically, say Rs 1000, over the next one year,” the panel said.
The government may consider issuing e-wallets for crediting small value payments, refunds, rebates / loyalty bonus for digital transactions and the same wallets can be used for making payments to the Government. On the same line, DBT payments have transferred costs, that were previously borne by the Government, to the users’ bank and agents, the committee said.
The Nilekani panel has recommended that the concerned Government departments and public sector entities to ensure that all citizens and businesses have options to pay digitally for all Government services, taxes, fees, all public procurement costs (such as earnest money deposits, etc), services provided by the public sector, utilities like telecom, power, water, sewage and gas and transportation and related services, many of which are run by the public sector, or regulated entities such as trains, bus, as well as tolls, parking and fuel.
The committee said that the government being the single largest participant in payments, take the lead on all aspects of digitisation of payments. The committee commended the government on the level of digitization they have achieved on the payments to citizens. “However, just as the government budgets for accepting payments in cash, the panel recommended that it also budgets for accepting digital transactions, ensuring that no convenience fee is charged on C2G payments
The committee recommended that the RBI should consider the setting up of an acceptance development fund, which is used to develop new merchants in poorly served areas. Since there are significant advantages in terms of improved compliance, the committee proposed that the government should look to provide a tax discount based on the proportion of digital payment transactions accepted by the business. “This should make digital transactions cheaper than cash. This was done in South Korea with some success,” it said.
“Ideally, MDR (merchant discount rate) and interchange fees should be determined by the market. However, that does not appear to be working, and there are fewer acquirers,” it said.
To correct this situation, the committee has proposed that the interchange on card payments be reduced by 15 basis points (0.15 per cent). This will increase the incentive for acquirers to sign up merchants, it said. The committee recommended that users must have options to make high value digital payments at any time. The RBI must review the usage patterns of RTGS and NEFT on a quarterly basis and adjust the hours of operation.