Context: Nandan Nilekani-led panel on digital payments has submitted its recommendations.

Background:

The five-member high-level panel headed by Aadhar architect and former Infosys chairman Nilekani was constituted earlier this year by the central bank tasked to submit a comprehensive report holding consultations with all the major stakeholders to strengthen the digital payments industry which has seen a ten-fold growth in the last five years.

Key recommendations:

• Targets: It has set a target for the government and regulators to achieve a ten-fold volume growth in digital payments over the next three years through customer-friendly pricing mechanisms and broadening access infrastructure.
• Measures to increase the outreach: Banks need to ensure that no user is more than 5 kms away from a banking access point and if such areas are found, these must be considered ‘shadow areas’ and a local vendor be made a banking correspondent (BC) as he deals in money and stays there.
• Measures to less-cash economy: removing transaction charges on digital payments made to government, inducing a competitive Merchant Discount Rates (MDR) pricing structure and easing KYC costs to banks are amongst the key recommendations put forward by the committee. 
• Role of the governments: committee has put the onus on government to be at the forefront of the transition by taking steps such as removing transaction charges on all digital payments made by customers to the government. The committee recommends that the Government, being the single largest participant in payments, take the lead on all aspects of digitization of payments.
• Committee has also asked RBI to set an interchange rate for transaction between customers and leave the MDR on competitive market pricing which would reduce the transaction cost for customers. 
• Special impetus on digitising mass volume channels such as recurring bill payments, toll and ticket payments at public facilities and digital onboarding of khirana store merchants has also been recommended by the panel in order to achieve the targeted growth.
• The panel has also asked the government to set up special risk mitigation and complaint registering digital portals. A special data monitoring mechanism to garner granular district level data on consumer trends and payment behaviour has also been suggested by the committee for targeted intervention to improve the existing infrastructure.