To provide an added thrust to cashless transactions, government pushes banks to up number of digitally-enabled vendors to 100 per branch from 30.
The government is believed to have asked scheduled commercial banks (SCB) in the country to acquire a minimum of 100 merchants per branch and enable them to transact digitally by the end of the calendar. Quick calculations based on branch details as of end-2016 suggest the 41 SCBs will have to acquire 1.1 crore merchants and make them digitally efficient by the December deadline.
As per the order, the banks will have to ensure these merchants are capable of handling payments via any or all of the modes like debit/cards, Unified Payments Interface (UPI), BharatQR code and Aadhaar-enabled payment systems (AEPS).
An article in the Financial Express today said, quoting sources, the current target has been more than tripled. Earlier, banks were to add 30 vendors per branch by September. However, most bank branches had not even acquired 15 yet
In order to achieve the target by December, the banks will have to acquire vendors regardless of their business size and the ownership pattern.
“In all these years, banks have already acquired the merchants that it made sense to acquire. If there was a business opportunity in acquiring aggressively, we wouldn’t have waited for targets,” a banker said.
When the banks acquire lenders, it means that the banks are getting into a business deal with them. Either banks acquire a portion of their business or the two parties strike a deal where some portion of the vendor's earnings are given to banks and banks, in return, offer deals which are beneficial to the vendors.Here, the vendors will pay a merchant discount rate (MDR) to banks for every transaction. The banks will receive 0.25 percent for an amount upto Rs 1,000 and 0.5 percent between Rs 1,000 to Rs 2000 for point-of-sale transactions, typically card payments. The MDR is 0.25 percent for transactions amounting Rs 2,000 and 0.65 percent above Rs 2,000 for UPI. The Reserve Bank of India still has to release the final guidelines for MDRs.