NEW DELHI: The high-profile committee of chief ministers led by Chandrababu Naidu tasked with finding ways of boosting digital payments has urged the Reserve Bank of India to slash card transaction charges to help wean Indians away from cash. The Niti Aayog has forwarded the proposal, mooted by committee member Nandan Nilekani , to the central bank."The chief ministers’ committee is in agreement that on account of the massive push towards a digital economy, financial transactions are moving from an era of low volume, high value to an era of high volume, low value,” Niti Aayog CEO Amitabh Kant wrote in a note to RBI Governor Urjit Patel.The proposal is in line with the central government’s push to boost digital transactions as part of efforts to shift to a cashless economy in the wake of demonetisation.The panel has suggested that the merchant deposit rate (MDR) be cut to 30 paise for transactions up to Rs 100 and a maximum of Rs 10 for transactions above Rs 2,000 to encourage payments using debit and credit cards. MDR is the commission paid by merchants to the banks that run the point-of-sale (PoS) machine networks.Since 2012, RBI has capped MDR for debit card transactions up to Rs 2,000 at 0.75% and at 1% for all transactions above Rs 2,000. MDR on credit cards is not capped and can go up to 2.5%. "On account of this transition, transaction fee or MDR has to be substantially lower,” the note said. "Volume growth will more than make up for lower transaction fees, since the marginal cost of transaction is very low.” The rise in volume could lead to a fourfold increase in MDR revenue, it’s estimated.The committee constituted by the Centre had asked Nilekani to prepare a paper on realigning transaction fees. As per the structure proposed by Nilekani, total MDR on transactions through cards and pointof-sale (PoS) machines should be 0.5% for purchases below Rs 100 to cover utility costs and a maximum of Rs 10 for higher transactions to facilitate larger ticket transactions. It has proposed MDR of 0.3% or Rs 6 for transactions through the unified payment interface (UPI) — an online payments platform — and 0.5-1% of transactions at micro-ATMs.Besides, it has recommended RBI consider imposing a 2% cap on credit card MDR to discourage the practice of composite MDR, which is often more than 1%.The committee has asked RBI to implement the changes under Section 18 of the Payments & Settlements System Act, 2007, in a manner that will encourage the shift to digital while safeguarding the interests of banks.A sizeable portion of the MDR goes toward paying interchange fees by the card-issuing bank and a part of it to payment service providers such as Visa, Master-Card or National Payments Corp of India (NPCI) for RuPay cards.The government has announced several measures, both for customers and merchants, to encourage digital payments in the country ever since it sucked out a large portion of cash circulating in the economy by cancelling the legal tender status of Rs 500 and Rs 1,000 notes.Steps have been taken to make petrol, railway tickets and insurance policies of state-owned companies cheaper if bought with debit/credit cards or other digital modes. Besides, a lucky draw cashback reward scheme for consumers and merchants will run from Christmas to mid-April for transactions of Rs 50 to Rs 30,000 through digital means.