Indian Railways Catering and Tourism Corporation (IRCTC) have reportedly barred several banks from using its payment gateway for debit card transactions. This move was taken after squabble between IRCTC and banks as the later refused to share a portion of the convenience fees they earned on customer transactions with IRCTC.
Although Financial Express sent an email to IRCTC requesting a comment but it remained unanswered. The Indian Railways subsidiary’s website is one of busiest sites in the country as more number of travelers prefers to book their tickets online.
Currently, the IRCTC website allows card-based payments only for cardholders of Indian Overseas Bank, Canara Bank, United Bank of India, Indian Bank, Central Bank of India, HDFC Bank and Axis Bank.
Earlier this year, IRCTC had asked lenders to share half the convenience fee that they recover from card transactions on the website. The Indian Banks’ Association (IBA) is in discussion with IRCTC and the Indian Railways to resolve the issue.
IRCTC had waived the convenience fee of Rs 20 Post-demonetisation. “Every day we are losing 50,000 transactions,” a senior executive with State Bank of India (SBI) said Financial Express on condition of anonymity. “Normally, the merchant pays the acquiring bank. But, since IRCTC does not pay us, we were recovering our costs from customers and that is how it had been all these years”.
Merchants who use the services of a bank for accepting card-based payments typically pay the bank a charge, referred to as the merchant discount rate (MDR).
Currently, banks are allowed to charge an MDR no higher than 0.25% on transactions of up to Rs 1,000 and a maximum of 0.5% on transactions of values between Rs 1,000 and Rs 2,000. Bigger transactions attract an MDR of 1%. These rates are based on temporary guidelines issued by the Reserve Bank of India (RBI) during demonetisation and extended thereafter.
Banks have claimed that government orders after demonetisation mandate public sector units, including IRCTC, to bear the cost of providing online payments to customers. Lenders refusing to comply with IRCTC’s demand say they are doing so as it violates the principles of merchant-acquiring business.
Recently, IRCTC sent out an alert on its website telling customers to select ‘multiple payment service’ tab to have more credit card, debit card and internet banking payment options.
Currently, customers can pay for the tickets they are buying using e-wallets, which do not charge any convenience fees to the parties.