Banks, IRCTC lock horns over payment gateway policy

Mumbai: Banks have locked horns with IRCTC, 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 rail booking website.

Under its new policy, Indian Railway Catering and Tourism Corp. Ltd (IRCTC) wants new banks wishing to integrate with it for payment gateways to put up Rs20 lakh as a security deposit, while those already present must pay Rs10 lakh. Banks must also share half of the convenience fees they levy on passengers. Even banks not levying such fees must share a standard Rs5 per transaction, and the annual payment must not be below Rs10 lakh.

They must also keep at least Rs1 lakh at all times in a so-called rolling deposit account, from which the payment for tickets will be made. Failure to keep the balance will lead to a Rs 25,000 fine.

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 offer various payment options.

Predictably, banks aren’t amused.

In a 21 March 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 they may be forced to withdraw from IRCTC if the policy is enforced.

IRCTC has already discontinued Oriental Bank of Commerce, Indian Bank and Andhra Bank, a senior banker told Mint, on condition of anonymity.

Banks say IRCTC’s fee sharing policy violates a government order dated 14 July 2016 which asked all public sector undertakings to 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,” IBA 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.” IBA also said there is no need for a deposit since banks have never dishonoured a payment. Mint has seen a copy of the letter.

An email, text messages and calls to an IRCTC spokesperson were unanswered till press time.

“SBI is not sharing the fees with the IRCTC,” a senior bank official said, requesting anonymity. “If IRCTC resorts to pressure tactics, then let them disable us. SBI accounts for 35% for all ticket sales through the portal. Let there be clamour in the market.”

Until November 2016, IRCTC used to levy Rs20 on booking non-AC tickets and Rs40 on AC tickets, while banks recovered a convenience fee of Rs10, the senior banker said. However, with demonetisation, the government waived these service charges until December 2016 and extended it in the Budget this year without specifying a timeline.

IRCTC is now set to lose nearly 36% of its revenue generated from these charges, as per its revenue break-up in the FY2015-16 annual report. It is possible that the railway portal is looking to recoup some of its losses by passing on these charges to banks.