Union Finance Minister Arun Jaitley, who spoke to chief executives of public sector and private banks on Thursday, said the principal objective of the governm- ent’s reform programme was to curtail the use of physical currency. To this end, the Minister set banks a target of converting cash transactions worth Rs. 2 lakh crore into digital transactions by December 30.
The Minister, who spoke to bankers through video conferencing, asked them to encourage customers to adopt alternate modes of transaction in a big way. “The principle agenda for the meeting was to expand digital banking itself... Objective of this meeting was to appeal to the banking system and prepare them in mission mode for expediting this entire exercise,” he said.
According to bankers at the meeting, the directives, seen as a move to fight the cash shortage following the ban on high denomination notes, will lead to an increase in use of point-of-sale terminals at merchant establishments and prepaid cards.
Task force to steer bank digitisation
Mr. Jaitley said that a task force under the Additional Secretary in the Finance Ministry will be set up to oversee the process. The committee, comprising government officials and bankers, will periodically review the progress by individual banks.
During the video conference with the bank officials, the Ministry also set targets for individual banks on how many transactions they should convert into digital before December 30.
More PoS terminals
“The Ministry is keen that all small transactions, like buying grocery etc. also are conducted in the digital mode. We have to encourage the merchants to accept prepaid cards as well as installing PoS terminals,” said a chief executive of a bank who was present in the meeting.
The Reserve Bank of India (RBI) had directed banks to waive the merchant discount rates (MDR) at the shops etc. till the end of December. MDR is the charge paid by a merchant for every swipe at his PoS terminal.
Bankers said this move will encourage more merchants to accept card payments.
‘Mission mode’
“Banks will now be focussing on significantly stepping-up transactions in mission mode through alternate banking channels,” the Finance Ministry said in a press statement.
“Apart from urban areas, banks will increase and sustain their focus on semi-urban and rural areas. This outreach would be backed-up by an advertising campaign from Indian Bankers Association (IBA), including demonstration videos, on how to use cards and other modes for cash less transactions,” the Finance Ministry statement said.
