Fair price shop owners are discouraging digital payments

Over six lakh fair price shop owners, who increasingly are doubling up as banking correspondents, have started to urge customers to discourage using digital transactions, thus, posing a problem for Indian banks.

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These shop owners are increasingly convincing customers to withdraw money from them and pay for their purchases, since they get a commission on such cash withdrawals. If the customer instead opts digital payment, the shop owners have to pay a small merchant fee to the banks.

These ration shop owners are now being roped in as business correspondents, especially for Aadhaar-enabled payment systems. When these ration shop owners act up as merchants, a nominal fee has to be paid to banks for every transaction they do.

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"While most banks have waived this merchant fee for now, the commission paid for transactions is the real problem," a senior bank executive told ET. This commission goes up to Rs 5 per transaction.

The finance ministry, however, thinks that this problem is made up by lenders who have not scaled up their banking correspondent (BC) operations.

"Their problem is that they now have to pay a great amount on the interoperable transactions to other lenders. So they are lobbying that ration shop owners should be declassified as BCs," a government official said on the condition of anonymity.

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NPCI is also convinced that the issue can be resolved by some changes in the software.

(Image source Telangana Today)