When IRCTC becomes like a central bank..

IRCTC is Indian Railways reservation portal and used for other multiple activities as well.

Just like Railways, it too is a monopoly and can pretty much do anything. Railways booking via IRCTC is a big business and is going to become even bigger with forced digitisation by Indian government.

This article caught my eye. IRCTC is now demanding banks to cough higher deposits and even part with charges for booking tickets. This is like those cases where you have a monopoly dealing with multiple entities:

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.

Just like a fixed Cash Reserve Ratio in many ways.

Obviously banks are not amused:


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.



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