To boost digital transactions
The Reserve Bank of India has removed charges on fund transfers through RTGS (Real Time Gross Settlement System) and NEFT (National Electronic Funds Transfer) in order to boost digital transactions and asked banks to pass on the benefits to customers.
Preferred routes for digital transfer of funds
RTGS is meant for large-value instantaneous fund transfers. The minimum amount to be remitted through RTGS is Rs 2 lakh with no upper or maximum ceiling. While NEFT is a nation-wide payments system facilitating one-to-one fund transfer up to Rs 2 lakh, usually on the same day.
What Nilekani-led committee said on digital payments
The move comes on the heels of the RBI-appointed Nandan Nilekani-led committee report for deepening digital payments, which had earlier recommended that banks incentivise digitisation of payments by not charging their customers and small merchants on digital transactions.
26% rise in NEFT transactions
The report also stated that the volume of NEFT transactions has steadily grown at a CAGR of 26 per cent over the past four years. However, the number of transactions is small, though the size of transactions is large. The average size of a NEFT transaction over the past 5 years has varied between Rs 60,000 and Rs 1 lakh.
RBI levies minimum charges
In a notification, the central bank stated that it levies minimum charges on banks for transactions through its RTGS and NEFT route. Banks, in turn, levy charges on their customers.
What RBI told banks
Banks will be required to pass these benefits to their customers and instructions in this regard will be issued within a week, the RBI notification stated.
RBI sets up committee to review ATM fee structure
RBI has constituted a committee involving all stakeholders, under the chairmanship of the chief executive officer, Indian Banks' Association (IBA), to examine the entire gamut ATM of charges and fees.
ATM charges may be revived
The usage of ATMs by the public has been growing significantly. However, there have been persistent demands to change the ATM charges and fees. ATM deployment, which had slowed down, may revive with new charges.
Details about the new committee
"The committee is expected to submit its recommendations within two months of its first meeting. The composition and terms of reference of the committee will be issued within a week," RBI said.
RBI reduced lending rate to 9-year low
In another development on Thursday, the RBI reduced repo rate -- the rate at which it lends to banks -- by 25 basis points (bps) to 5.75 per cent.This is the third straight reduction in the rates in 2019 and the lowest in 9 years.