Banks, IRCTC battle over payment charges
Banks have locked horns with the ticketing arm of Indian Railways after it started demanding that they put up hefty security deposits and share half of their transaction fees with it if they want to be on its website.
Under its new policy, Indian Railway Catering and Tourism Corp. (IRCTC) wants new banks wishing to integrate with it to put up ₹20 lakh as a security deposit, while those already present must pay ₹10 lakh. Banks must also share with it half of the convenience fees that they levy on passengers. Even banks not levying such fees must share a standard ₹5 per transaction, and the annual payment must not be below ₹10 lakh. They must also keep at least ₹1 lakh at all times in a ‘rolling deposit’ account, from which the payment for tickets will be made. Failure to keep the minimum balance will lead to a ₹25,000 penalty per instance.
IRCTC is one of the 11 state-run companies in which the government plans to sell shares this year. The new policy comes in the backdrop of the government waiving all charges levied on rail bookings, a move that threatens to take away a major chunk of its earnings. In its 12 February policy document seen by Mint, IRCTC said the charges were aimed to enable hassle-free transactions and make various payment options available.
Predictably, banks aren’t amused.
In a March 21 letter to IRCTC, the Indian Banking Association (IBA) termed the policy “unjustified” and said banks were unable to place crores of rupees in rolling deposits which earn no interest, and warned banks may be forced to withdraw from IRCTC if the new policy is enforced.
IRCTC has already discontinued Oriental Bank of Commerce, Indian Bank and Andhra Bank.
Banks say IRCTC’s policy of fee sharing violates the government order dated 14 July 2016 which mandates that all public sector undertakings will bear the merchant discount rate (MDR). MDR is the fees the merchant pays the acquiring bank for providing the service to customers. Since IRCTC does not pay MDR to banks, banks levy a fee on ticket buyers to cover their costs.
“Even the oil marketing companies have started paying MDR to banks for debit card transactions,” the IBA letter said. “Banks would urge IRCTC to pay MDR for all transactions decided by the government. The RBI has identified a special MDR for government transactions, making it commercially viable for IRCTC. Meanwhile, banks will be unable to pay a part of surcharge as they have to cover operation costs.”
The IBA letter also said there is no need for any security deposit since banks have never dishonoured a payment. Mint has seen a copy of the letter.
An email, text messages and calls to IRCTC were unanswered till press time.