A number of sectors have been hit by COVID but the worst is being faced by the small-scale units. This has adversely impacted employment as well. Is there a way to get the economy back on track? The answers will not be forthcoming easily. Many have suggested the printing of currency notes to generate demand. However, there is a risk of inflation associated with it and the poorest are hit the most by inflation.
One of the options, however, is to use COVID as an opportunity to streamline processes and leverage such developments as they have the potential of reviving economic activity. This doesn’t cost money.
Technology can be a game-changer. The Prime Minister has emphasized the need for technology in various spheres of governance and in the delivery of services time and again. The digital initiative in the country, especially the one in the financial sector, was also at the behest of the Prime Minister. The results are there for everyone to see. The credit for making India one of the most digitally connected countries in the world should go to the initiatives taken at the behest of the Prime Minister.
The most pronounced development has been in the payment space where India has become a world leader in the last five years. Effort should now be to take it to the next stage and enable even the smaller financial entities to come on board. This is possible and would be of utmost benefit to units belonging to the beleaguered Medium, Small Scale and Micro Enterprises sector.
25 banks are presently linked to enable their customers to pay their Income Tax through internet banking or by cash deposit at branches of these banks. However, surprisingly, customers of only 6 banks are permitted to pay through credit cards and debit cards issued by these banks. No payment can be made by UPI.
For Goods and Services Tax (GST) too, only 25 banks are linked. It is only through their account in these limited number of banks that customers are able to pay through internet banking or by cash deposit at branches of these Banks. However, ironically, no one is permitted to pay by using any credit card and debit card. The payment can’t be made by UPI either.
Ministry of Corporate Affairs has authorized just five banks (Indian Bank, HDFC, ICICI, PNB, UBI and SBI) for collection of MCA21 fees. By implication, only the account holders of these banks can avail of internet banking facility.
Further, payment via challan can only be made in the authorized branches of these above five banks.
Customers of only 17 banks are permitted payment through credit cards and debit cards issued by these banks. RuPay cards are not accepted. In this case, too, payment can be made by UPI.
There are 900 million credit cards and 100 million debit cards issued by as many as 2000 banks in India. However, for some unknown reason, most of them have been kept out of the system for making payments as mentioned above. If a person does not have an account in one of ‘select’ banks, he has to go to one of these banks and furnish cash or cheque and then pay.
All e-commerce sites, even in the private domain, accept all debit cards and credit cards, including global cards. NPCI has issued RuPay that has emerged as our national card. It has over 700 million customers. Other issuers are Master Card and Visa.
As a consequence of the existing protocol for payment, all NRIs and Persons of Indian Origin (PIO) find it hard to pay taxes on-line. Practice all over the world is that a person or any entity can use a debit card or credit card to make payment of taxes to the government.
To overcome the handicap arising out of only limited number of instruments and banks being allowed to carry out the aforementioned transactions, many large business entities in India maintain accounts in banks which are authorized to carry out such transactions while their main banking is with a bank which is not permitted to process these payments. The biggest sufferers are the MSME as they find it difficult to maintain and manage multiple bank accounts.
There is another associated problem. No e-commerce site charges any fee for payments. However, as per RBI guidelines, banks levy a fee is paid for every transaction relating to such payments. Perhaps it is this income arising out of the fee charged by a ‘few’ that is preventing the facility from opening up.
The existing arrangement that leads to non-digital transactions results in unnecessary visits to bank branches and paperwork (as a consequence of issue of cheques and documentation) which not only has an additional financial cost but is also environment un-friendly.
The sector should and can be opened up to others beyond a select few banks. It is in the larger interest of the country. Each collector of payment, in this case, CBDT, MCA and GST have bank accounts approved by CGA or GST Council. Any payment made by any method – internet banking, debit card, credit card and UPI will be credited to one of these accounts only. Hence no fresh account approval is needed from CGA or GST council to enable all cards and UPI.
This will require integration of these sites with those of card issuers namely NPCI, Master Card and Visa. It should not be a difficult proposition for these agencies to do this back-end integration as this has been done by even small e-commerce companies.
Digital payment is an integral part of the ease of doing business. Hence, it would be worthwhile mandating for all the payments received by various agencies to accept all debit and credit cards of all the banks and payments by UPI.
It will not only enable swifter transactions but will help real-time accounting and elimination of paperwork, one of the objectives outlined for going digital. It will also induce even smaller entities to go digital. Above all, this will fulfill PM’s dream of taking digital transactions and benefits of digitalization to masses.
—Anil Swarup is former Coal Secretary, Government of India and author of the book ‘Not Just A Civil Servant’. The views expressed are personal