The Indian Government has announced new proposals to reduce the tax burden on electronic payments in an effort to reduce the use of cash within the country and bring hundreds of millions of consumers into the electronic payments mainstream. Among the proposed changes are tax rebates for merchants who accept electronic transactions, the introduction of uniform interchange rates for payment cards, a bank-wide mandate to roll out more cards enabled point-of-sale (POS) terminals, among other changes.
Commenting on the proposals, Finance Minister Arun Jaitley said,
“One way to curb the flow of black money is to discourage transactions in cash. Now that a majority of Indians has or can have, a Rupay debit card. I therefore, proposes to introduce soon several measure that will incentivise credit or debit card transactions and disincentivise cash transaction”
India remains a cash heavy payment market and will continue to see large cash volumes in the economy due to the fact that much of its population is unbanked or underbanked. That being said, the proposals brought forward by the Indian Government show that authorities are committed to improving the domestic electronic payment ecosystem and building a robust and modern payments market.
For more information on the Indian payments market, see Mercator Advisory Group’s research note, Country Payments Market Profile: India released in April 2015.
Overview by Tristan Hugo-Webb, Associate Director, Global Payments Advisory Service at Mercator Advisory Service
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