Demonetisation: No charge on use of debit cards; farmers to get easier cash access

New Delhi: Amid the ongoing political outcry over demonetisation, the government on Wednesday announced more steps to help farmers to meet their cash needs during the ongoing rabi season and directed banks to waive debit card transaction charges to encourage digital payment.

To ensure quick and unhindered flow of credit and cash to farmers during the current rabi season to deal with ban of Rs 500/1,000 notes, the government has allowed Nabard to disburse Rs 21,000 crore through cooperative banks to farmers.

Listing various measures taken by the government to incentivise digital transactions, Economic Affairs Secretary Shaktikanta Das said the Railways has already waived service charges on online booking of tickets and telecom operators have agreed to make mobile banking services in feature phones free of cost till December 31.

While government departments and PSUs have been asked to make electronic payment to contractors and its employees, the road transport ministry has asked automobile manufacturers to install digital RFID tag on all new vehicles to enable cashless payment at toll plazas and checkposts.

Similarly, the government has doubled the monthly transaction limit through e-wallets to Rs 20,000.

"All these measures are meant to promote digital penetration. It will also help farmers in the current rabi season to ensure a normal rabi crop on the back of good monsoon," he said.

Das said: "Public sector banks, some of the private banks and some of the service providers that provide switching services have agreed to waive the service charges on the use of debit cards up to December 31, 2016."

As of now, Rupay debit cards have already waived the switching charges. Other debit cards that operate through international card network companies like Mastercard and Visa currently charge transaction charges.

"The MDR (merchant discount rate) charges on use of debit cards, the charges being levied by banks and the switching charges will stand completely waived. So, there will be no charge on use of debit cards," he said, adding that banks will make announcement in this regard individually.

With regard to the farm sector, Das said Nabard will disburse Rs 21,000 crore to District Central Cooperative Banks (DCCBs) for onward lending to farmers through Primary Agricultural Cooperative Societies. Over 40 percent small farmers get crop loans from cooperative institutions.

Das said RBI and the banks have been advised to make the required cash available to the District Central Cooperative Banks (DCCBs) to ensure quick and unhindered flow of credit and required cash to farmers, especially for sowing and other agricultural operations during the current rabi season.

He further said PSU banks have started getting queries from private corporates for giving prepaid cards to employees.

"We expect that the private sector companies will make payment to their employees through digital payments. CMDs of several banks have told me that in last 2-3 days, there has been a huge demand for pre-paid cards from the corporate sector," Das said.

He further said telecom operators have also made mobile short code messages -- used mainly for banking services in feature phones -- free till December 31, 2016, in an attempt to promote mobile banking and cashless transactions.

"This will provide a very cost-effective method of digital financial transaction, especially to the poor people with feature phones (which are currently 65 percent of the total phones in the country)," a finance ministry statement read.

Das said that following the cancellation of old Rs 500 and Rs 1,000 notes, the government has taken a number of measures for farmers like higher cash drawal limits for farmers and registered traders in APMC markets / mandis, extension of time limit for payment of crop insurance premium, purchase of seeds with old notes from certain select government centres.

Steps have been taken to ensure availability of cash in rural branches of banks and 1.55 lakh post offices. Network of banking correspondents has also been activated with higher cash holding limits to meet requirements of people in rural areas, the ministry said.

As a relief to small borrowers taking loans up to Rs 1 crore, RBI has already decided to provide additional 60 days time for repayment of dues.

"This will be applicable to personal and crop loans, including housing and agricultural loans, taken from banks, NBFCs, DCCBs, primary agriculture cooperative societies (PACS) or NBFC-MFIs," the statement added.

It said Indian Railways has decided not to levy service charges of Rs 20 for second class and Rs 40 for upper classes on purchase of reserved e-tickets up to December 31, 2016. "This would facilitate and encourage passengers to buy e-tickets instead of across the counter purchase through cash," it added.

About 58 percent of the railway tickets are purchased online and the effort now is to increase the purchase of e-tickets.

"It is expected that the above measure will encourage people to migrate to cashless transactions," the ministry added.