During the lockdown last year, the urban economy thrived on UPI payments and there was an uptick in digital modes of payments. But, in semi-urban and rural areas, where digital and financial literacy is still a work in progress, the banking correspondent or BC networks like Spice Money’s supported the essential service of cash transactions. Over 90% of our 5,00,000 strong entrepreneurial Adhikari network operates in rural areas where bank infrastructure and ATM availability is still a rarity.
While encouraging initiatives such as PIDF by RBI have already been announced, in the upcoming Union Budget, we expect the government to announce a subsidy on MDR and POS devices. Waivers on MDR and POS are pertinent to encourage the expansion of these services via the BC network. Accessibility of financial services is a major gap in financial inclusion and POS terminals would be more sustainable than ATM infrastructure in semi-urban and rural areas.
Another key aspect, like many have echoed, would be taxes. The earnings of the underbanked population are hit with taxes levied on basic money transfers. The government should consider providing some GST relief on smaller transactions conducted on the BC network.
A special provision on GST and TDS for the BC model will help create visibility for this business. Further, tax benefits to the rural end-customer on digital purchases will also help boost adoption of digital financial services in low-income groups.
The government showed support for the rural areas by deploying DBT schemes with the BC networks backing them by providing withdrawal services. The government should further this support by building BC networks as it will spell growth for the vision of Digital India beyond simple internet connectivity.
It will allow more financial products and services to reach the remotest parts of India and accelerate the bridging of the gap in access to banking services in India.
The author is the founder of Spice Money. Views are personal.