People will go back to cash payments unless costs associated with digital payments are eliminated, says TRAI chief.

Telecom Regulatory Authority of India (TRAI) Chairman Ram Sewak Sharma said on Monday that people will go back to cash payments unless costs associated with digital payments are eliminated and the present exemptions from charges on cashless payment are not continued beyond March 31.

“It should not happen that today we are accelerating it (digital payments) and there are huge incentives that are given… Those incentives must sustain…India is an extremely cost sensitive market,” Mr.Sharma said at a FICCI event.

“The only inhibiting factor in the long run remains the cost. My suggestion is that they should actually emulate the telecom sector, where recharge of Rs.10 is also done that too digitally and these are financially sustainable…This formula has to be adopted by the financial sector. It is a principle called ‘work-done’ principle where you compute the charge on basis of work done by the entity.”

Mr. Sharma explained that for a transaction of sending money from one bank to another digitally, “the cost, in my view, should be zero or very insignificant. Banks should not look at this as the money earning part. More lucrative is liquidity in the system. If there is cash in system, this will create more profits for the banks.”