RBI lowers transaction charges for payments made online through debit cards

The Reserve Bank of India has lowered transaction charges for payments made online through debit cards to a maximum of 1 per cent. From July 1, 2012, transaction fee for online payments up to 2,000 made through debit cards has been slashed to 0.75 per cent of the value of the goods or services bought. The charge can be a maximum of 1 per cent for purchases above that value. Banks were earlier charging 1.8 per cent of all online payments made using debit cards.

The RBI's directive to banks on online transactions was issued under Section 18 of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007). Banks don't charge a fee for offline use of debit cards. The move is expected to boost ecommerce in India. According to the Internet and Mobile Association of India (IAMAI), e-transactions in the country totalled Rs 46,000 crore in 2011.

Over the past five years, the value of debit card transactions has risen 355 per cent to 26,418.10 crore, according to RBI. However, more than 95 per cent of this is offline transaction. Over the same period, debit card usage, both in terms of number of transactions (primarily offline) and growth in value, has outstripped credit card spending by a huge margin. The number of debit cards issued has risen 265 per cent to 18.2 crore while the number of credit cards has increased by just 5.5 per cent to 1.82 crore.

Usage of debit cards is also higher than that of credit cards in terms of total number of transactions. Between 2005-06 and 2010-11 (provisional), the number of transactions for debit cards grew 270 per cent to 17.02 crore. During the same period, the number of credit card transactions increased by 50 per cent to 23.4 crore.