E-fund transfer fee


The State Bank’s decision to withdraw the facility of free of cost digital fund transfer services is disappointing and will thwart efforts to boost the still nascent digitisation of payments for documentation of the economy. The central bank had extended the facility to consumers of banking services when Covid-19 broke out last year, stopping banks from charging a fee on the digital transfer of money. The idea was to facilitate people during the lockdowns and encourage the use of e-banking channels. The step was appreciated and banks saw a substantial surge in internet banking along with the use of plastic money for purchases from e-commerce platforms. For instance, the volume of e-banking transactions rose by around 26pc from 236.1m at the end of March 2020 to 296.7m at the end of December. Likewise, the value of transfers also grew by just under 23pc from Rs17.5tr to Rs21.5tr during that period. Although paper-based transactions, which had collapsed during the lockdown period, are resurging again, their number remains below the March 2020 level. Banks also benefited from the decision as they had fewer customers to deal with in person, which brought down their operational costs.
There is no doubt that virus-related mobility restrictions and the fear of getting infected contributed significantly to the popularity of e-transactions; the suspension of the heavy fee charged on them proved to be a major incentive for consumers to shift to mobile banking. Therefore, it is feared that the decision to allow banks to “recover their costs to help them in building sustainable innovative business models” will at best weaken this shift to online banking and at worst reverse the gains made. The State Bank has exempted transactions totalling up to Rs25,000 per month per account from any charge but that means little to the majority of internet banking users. Even though the overall internet transaction charges allowed are nominal for now, it is going to negatively impact endeavours for digitisation of the economy. As banking sector regulator, it is the State Bank’s job to protect the interests of the banking industry. But at the same time, it has certain obligations towards consumers of banking services. It would have been much better if the central bank had told the service providers to continue to share a very small bit of their savings with their customers through free of cost e-banking services. After all, it is the customers’ money that helps them make massive profits.