‘Cash costly,allow banks to charge for cash transactions’
The country’s largest bank, State Bank of India, wants the government to allow banks to charge customers for cash transactions, said a senior executive.business Updated: Dec 26, 2016 10:34 IST
The country’s largest bank, State Bank of India, wants the government to allow banks to charge customers for cash transactions, said a senior executive.
“We must be allowed to charge bank account holders to charge for cash transactions. Handling cash is a huge cost to banks,” said Manju Agarwal, deputy managing director at SBI. “Given that this is an opportune time, there needs to be incentives to use cards or internet to make electronic payments and discourage cash.”
The Reserve Bank of India and commercial banks face a total of ₹21,000 crore ($3.5 billion) in currency operations costs annually.
Speaking about the digital push after demonetisation, Agarwal said they have seen multifold rise in debit card and mobile banking usage to make payments.
Banks, including SBI, have been promoting cashless transactions through cards and their mobile applications.
SBI is aggressively promoting its SBI Buddy. Moreover, in collaboration with telecom firm BSNL, it has launched its new app – ‘mobicash’ – which features three-way access to transfer fund from the mobile phone.
Agarwal said there were easy and secure ways to make cashless transactions even on basic phones which facilitate transactions through SMS or USSD code.
Last week, SBI chairman also spoke about finding ways to disincentivise cash transactions, such as imposing a charge or levy above a specified limit or threshold, after normalcy is restored in banking operations.
With about 90% of our transactions done in cash, India has a cash-to-GDP ratio of about 12.2%, believed to be relatively high compared to many of its peer countries like Brazil, Russia and Mexico.
Though the withdrawal of high-value currency notes has taken the number to 7.3% of the GDP, which is lower than US at 7.8% (as per RBI data), it is estimated to settle at 10% after the entire demonetised value is back in the system.
Bhattacharya said if India wanted to de-emphasise cash, not only should there be an incentive for people to move towards a cashless economy, but also a disincentive for transacting excessively in cash, leaving out small-ticket transactions.
“Cash imposes a huge burden. We don’t understand it as it is not immediately visible. It is a huge burden on society,” she added.
First Published: Dec 26, 2016 10:22 IST