DFS Asks RBI To Take A Final Call On Aadhaar Enabled Payment System

The Department of Financial Services (DFS) — which covers the functioning of banks, financial institutions, insurance companies and the national pension system — has requested the Reserve Bank of India (RBI) to take a final call on the Aadhaar Enabled Payment System (AePS) interchange fees fixed for banks.


AePS is a mode of transaction through which bank customers can withdraw funds, check balance as well as do transactions through small ATM devices installed at outlets like kirana stores, public distribution shops, etc.
The DFS had sought RBI’s intervention after banks expressed their dissent over the proposed fee structure. The April circular had revised the interchange fees for every AePS transaction at 1% of the transaction amount, with a minimum charge of INR 5 and maximum of INR 15.
However, the National Payments Corporation of India (NPCI), that operates retail payments and settlements systems in India,  in June held back the decision due to confronting issues around interchange fees (service fee that one bank pays to another) and sharing of costs arising from participating entities.
The existing interchange rates are 0.5% for every transaction and no charges for transactions less than INR 100. A share of this interchange goes as commission to the retail partner or business correspondent in the field.


“Since banks and the NPCI could not come to a conclusion regarding the interchange fees, the matter had to be sent to the RBI for intervention,” ET quoted a senior banker in the know of the matter. “Ideally these issues should be solved within the discussion forums created by NPCI,” he added.
The concept of micro ATM interchange fees has always been a matter of disagreement between the banks which have a large customer base and the others which install the Micro ATM devices across rural areas.
Recently, Kolkata-based public sector lender, United Bank of India (UBI) stopped AePS transaction for its users on devices installed by private banks — such as IDFC Bank, Induslnd Bank, RBL Bank and YES Bank — allegedly for round-tripping funds by the business correspondents (BCs) of these banks.
[The development was reported by ET ] Source: INC42

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