The Reserve Bank of India put forward its Payments Vision 2025 being hopeful of building on its 2019 – ‘21 objectives. Their latest agenda is to achieve a record of less than 0.25% cheque involvement in all retail payments across India.
To reduce cash circulation and improve the digital payments volume by almost 3 times, the RBI thought of strategies like reducing IMPS charges, linking bank credit cards to UPI, etc. This guide will discuss RBI’s several fresh initiatives which are likely to promote the accumulation of central bank digital currency.
What are Some Objectives of the RBI Produced in Payments Vision 2025?
While conducting all projected actions within the vision period, the RBI has promised to thoroughly investigate all channels involved in digital transactions. It will also strive for new opportunities in the RTGS system especially while settling deals with key trade currencies.
The above measures will be adopted to fulfil the following objectives:
- The volume of digital transactions is to grow by 3 times by the end of March 2025.
- A cumulative improvement in the payment transaction volume by 8% is expected.
- Debit card usage across all points of sale is estimated to grow by 20%.
- The number of debit cards is set to cross credit cards.
- There can be a growth of mobile-based consumers by 50% CAGR and as a result, the cash in circulation will be cut short as a sizeable portion of the GDP.
- Initiatives are to be taken to expand establishments accepting credit cards close to a capacity of 250 lakhs.
- The return on investments derived from UPI infrastructure will grow by 50% while NEFT and IMPS modes will expand by 20%.
What is IMPS?
Immediate Payment Service or IMPS, maintained by the National Payments Corporation of India, makes instant fund transfer possible around the clock. You can rely on this system not only because the transaction gets settled in seconds but also because there is no minimum transfer limit. However, you cannot opt for sending more than Rs. 2 Lakhs at a time to any beneficiary using the IMPS.
Nevertheless, banks levy IMPS charges to support the infrastructure cost. These include two different components:
- IMPS Transaction Charge
This amount varies from one bank to another. Usually, it does not exceed Rs. 15 and is a minimum of Rs. 2.5 per payment. Recently the RBI is looking for ways to waive these charges completely or at least partially to attract more consumers to use these facilities.
- IMPS GST Fee
The GST amount depends on the total transferrable amount and only gets levied to outward transactions. This means if you are receiving money through IMPS mode, you do not need to worry about paying this GST fee.
Why Does RBI Want to Make Changes in the IMPS Charges?
All the increased efforts towards making digital payments more accepted modes for the transaction are to improve the country’s overall economy. The RBI’s initiatives are an outcome of previous analyses involving ways to curb the transaction charges levied by banks.
Moreover, RBI intends to demarcate credit products from separate payment methods to simplify digital payments. In this regard, it has requested government intervention too to make UPI payments come under the zero MDR rule. Their agenda is to preserve both the interests of consumers as well as businesses that are striving for endless innovations to support the various digital payment gateways.
What are Some Other Electronic Payment Systems Maintained by Banks?
Besides IMPS, NEFT and RTGS are two popular digital payment solutions you can avail to receive or pay money under the surveillance of RBI. Whether you are a credit cardholder or strictly adhere to debit transactions, you may use them once you know how they work.
Whereas RTGS is particularly designed to support high-value transactions, you may use NEFT to transfer any amount of money across India. While IMPS transactions do not authenticate balance transfers of more than Rs. 2 Lakhs, RTGS facilitates these tasks in seconds.
To understand the difference between NEFT and RTGS, refer to the table below:
|You may even transfer Re. 1 using this digital payment system. Additionally, there is no upper limit for a single transaction.||The minimum transaction cannot be less than Rs. 2 Lakhs whereas there is no upper threshold.|
|NEFT payments get settled in hourly batches. Therefore, the recipient may receive the amount some time after the payee has completed the process.||Settlement takes place instantly.|
|NEFT transfers get processed anytime.||This service is not available during non-banking hours.|
|It is a form of net settlement where the tax gets deducted before the recipient gets the money.||Settlement happens on a gross basis.|
|Transaction fees charged by banks are relatively less.||The transaction fee is more in an RTGS payment.|
RBI has been aiming to minimize these processing charges to boost digital transactions manifold by 2025. Besides their best efforts to bring in revised IMPS charges, the RBI is looking for opportunities to promote the interests of vital PSPs. For this, it is currently relying on the feedback of all public and private sector merchants managing settlement risk and streamlining the payment interfaces.