The RBI wasn’t happy about merchants charging for debit card payments, and in a statement recently, had told banks to cut relationships with merchants who paid through debit cards.
Yet, when you attempt to pay an LIC Premium online, through a debit card, here’s what you see:
Incredibly, if you pay through netbanking, there is no charge!
It’s not a heck of a lot - a Rs. 12+ST charge on a Rs. 10,000 transaction will cost you less than the time it takes for you to complain about it. But it’s the concept - of charging for what has been regulated to be free - that counts.
RBI needs to goad banks to take action. Banks charge this fee to LIC when they use debit cards and the Visa/Mastercard framework. LIC then charges that fee over to you. They will tell you that it costs them money.
However any payment mechanism has a cost. Cheques will bounce or have some errors in them. Cash has a handling cost (keeping change, taking back/forth to banks to deposit, ensuring there is no pilferage). Even netbanking payments will cost LIC something. In that context, it’s not entirely clear why they want to charge customers for payments on credit or debit cards, when they can easily absorb the cost.
Additionally, debit cards needn’t even hit the Mastercard/Visa framework - they should be connected only through RBI and NPCI’s Rupay networks, therefore not giving them any money (and saving costs for consumers).
What RBI should be doing is: telling banks to remove LIC as a merchant unless it absorbs debit card costs. But as we’re seeing, the punishment is only for small merchants. When a big company like LIC does bad things, they all look the other way.