Why was the panel set up?
In Early 2019, The Reserve Bank of India (RBI) constituted a high-level committee headed by former chairman of the Unique Identification Authority of India (UIDAI) Nandan Nilekani to set up a robust digital payments ecosystem in the country.The committee has been asked to review the existing status of digitization of payments, identify gaps in the ecosystem and suggest ways to plug them.
What are its terms of reference?
According to its terms of reference, the panel has to suggest a medium-term strategy for deepening digital payments, and measures to strengthen safety and security.
The five-member high-level panel’s recommendations:
1. It set a target for the government and regulators to achieve a ten-fold volume growth in digital payments over the next three years through customer-friendly pricing mechanisms and broadening access infrastructure.
2. The committee listed a comprehensive set of interventions needed to achieve the goal of a less-cash economy .
3. Initiatives such as removing transaction charges on digital payments made to government, inducing a competitive Merchant Discount Rates (MDR) pricing structure and easing KYC costs to banks are amongst the key recommendations put forward by the committee.
4. The committee noted the recent growth in volume of digital payments by a factor of 10 over five years and has set a target for additional growth of 10x in three years.This growth will be driven by a shift from high value, low volume, high cost transactions to low value, high volume, low cost transactions. Over a longer period, this will eventually lead to a decline in cash requirements.
5. The report has made policy recommendations to all major regulators such as RBI, SEBI, IRDAI and DoT with the objective to reduce cash based payments. Additionally, the committee has put the onus on government to be at the forefront of the transition by taking steps such as removing transaction charges on all digital payments made by customers to the government.
6. It asked RBI to set an interchange rate for transaction between customers and leave the MDR on competitive market pricing which would reduce the transaction cost for customers.
7. Special impetus on digitising mass volume channels such as recurring bill payments, toll and ticket payments at public facilities and digital onboarding of kirana store merchants has also been recommended by the panel in order to achieve the targeted growth.
8. A special data monitoring mechanism to garner granular district level data on consumer trends and payment behaviour has also been suggested by the committee for targeted intervention to improve the existing infrastructure.
9. Enable Kisan Credit Cards for digital payments by converting them to RuPay cards on priority (say, within a year), with adequate infrastructure in place for KCC holders to make purchases digitally.
10. Technology should be made available to people with special needs, and in Indian languages, to the extent possible.
11. round-the-clock RTGS and NEFT facility and duty-free import of point-of-sales machines.
12. Target of 10x growth in three years is achievable if all these recommendations are implemented in time bound fashion.