To further discourage extensive use of cash, the Finance Minister Nirmala Sitharaman brought in new measures in Budget 2019 - effectively another crackdown against cash. Right from cash withdrawal to making digital payments, Sitharaman had some bittersweet news for customers, banks, RBI and businesses. The purpose was to promote digitalisation in India. There are various provisions in the Act which prohibit cash transactions and allow or encourage payment or receipt only through account payee cheque, account payee draft or electronic clearing system through a bank account. 

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Sitharaman says, "To promote other electronic modes of payment, it is proposed to amend these provisions to also allow payment or receipt through other prescribed electronic modes."

One of the major good news was in terms of charges on Merchant Discount Rate (MDR) which used to be generally passed onto customers, while using digital payment modes. 

Sitharaman points that, there are low-cost digital modes of payment such as BHIM UPI, UPI-QR Code, Aadhaar Pay, certain Debit cards, NEFT, RTGS etc. which can be used to promote less cash economy. 

Hence, she says, "I, therefore, propose that the business establishments with annual turnover more than Rs 50 crore shall offer such low cost digital modes of payment to their customers and no charges or Merchant Discount Rate shall be imposed on customers as well as merchants."

Notably, recently, during second bi-monthly monetary policy, RBI made similar announcement by scrapping charges they levy to banks on NEFT and RTGS transactions. RBI had asked banks to do the same with customers. In short, making NEFT, RTGS transactions free of charge. 

On the move today, Kumar Rajagopalan - CEO, Retailers Association of India (RAI) said, "The decision to waive off MDR on payments made using BHIM, UPI, Aadhaar Pay, NEFT and RTGS for business establishments with an annual turnover of Rs 50 crore is a good incentive to slightly larger retailers to move towards digital transactions."

Sitharaman has asked, RBI and Banks to absorb these costs from the savings that will accrue to them on account of handling less cash as people move to these digital modes of payment. 

Overall, Bhavin Turakhia, co-founder & CEO, Zeta said, "The Budget 2019 has witnessed giant leaps towards building a cashless economy. One of the biggest steps is developing the country’s first payment system (One Nation-One Card)for transport which will be a holistic card for citizens for digital payments across travel, shopping etc. The decision of not charging customers for digital payments and waiving off the MDR charges is also a push in the right direction to encourage every citizen to carry out digital transactions and make India a less cash economy."

Additionally, to further discourage cash transactions, Sitharaman proposed to provide for tax deduction at source at the rate of 2% on cash withdrawal by a person in excess of Rs. 1 crore in a year from his bank account. Some business models, where large cash withdrawal is a necessity, are proposed to be exempted. It is also proposed that the Central Government may notify the persons to whom these provisions shall not be applicable in consultation with the Reserve Bank of India.