Fee income of banks is likely to be hit by around Rs 1,000 crore as charges on card transactions have been waived off by lenders owing to demonetization drive.
After ban of high value currencies, government had given direction to banks for waiving off fees on card transactions till December 31, 2016 in order to push digital payments.
According to a report in Economic Times, banks would incur a loss of around Rs 1,000 crore due to this move and their losses would rise if the waiver would be extended further. Merchants have to pay merchant discount rate (MDR) to banks to cover bank's costs to facilitate the transaction.
"We have not received any formal instructions from the government in that matter, but we have been assured that if there is revenue loss to banks because of waiving of these charges, they might compensate us from a technology fund that they have set aside," the report quoted a senior bank official as saying.
Bankers were of the opinion that as the cost associated with the maintenance of card acceptance and payments infrastructure was recovered through the MDR fees, it shouldn't be extended.
The Reserve Bank of India has put a cap on fees collected by banks for debit card transactions. Fees for debit card transactions beyond Rs 2,000 were charged at 1 per cent, while it stands at 0.75 per cent for anything below Rs 2,000. However, fees for credit card transactions are not capped and vary depending on the arrangement between bank and the merchant.
