Banks seek higher fees from NHAI to run FASTag services

In a set of recommendations sent by the Indian Banks’ Association (IBA) and also individually by several private and state-run banks to the ministry of road transport and highways (MoRTH) and NHAI, banks have asked the highways authority to revert to the earlier interchange PMF of 1.50% to make the operations of FASTag service sustainable.

The banks also want the higher PMF to continue for at least two more years till 31 March 2024.

The government has introduced a mandatory FASTag programme nationally under which all toll collection at highways has now been automated.

The toll is collected automatically from an individual’s accounts with participating banks that issue FASTags whenever a vehicle crosses toll plazas at highways. More than 95% of highway toll is collected through FASTags.

According to two people aware of the development, in their representation to the road ministry and NHAI, banks have said that a reduction of interchange fee from 1.5% to 1% will lead to 31% reduction in the income from NETC FASTag business, thereby affecting the viability of the project for the banks. NHAI had reduced PMF to 1% effective April 1, 2022.

“Banks and National Payments Corporation of India (NPCI) are seeking increase in PMF to protect margins. We are in dialogue with them to find a solution and something should be worked out soon,” said Giridhar Aramane, secretary, MoRTH, in a phone interview.

He said, however, that though banks are seeking a revision in PMF, they had previously participated and bid aggressively, quoting lower charges, to bag FASTag contract.

“The competition in the FASTag providers is such that only willing operators will be in service. Yet, we will see what best option is available on the matter,” said Aramane.

Queries sent to IBA, NHAI, finance ministry, and secretary-department of financial services remained unanswered till press time.

HDFC Bank and ICICI Bank also did not respond to queries.

FASTag is one of the ambitious and most successful programmes of the road ministry, transforming the way highway toll is collected across the country by easing the entire process.

For banks, the provision of FASTag as participating and issuer bank is also a good business given the scale of operations. In FY23, the government intends to collect over ₹40,000 crore as toll revenue and almost the entire sum is expected to be collected using the FASTags.

Recent data from the road ministry showed that FASTag penetration has surged from about 16% in FY18 to about 96% in FY22. Total toll collected in FY18 was ₹22,000 crore including a mere ₹3,500 through FASTags. In FY22, while the total toll collection was ₹34,500 crore, toll collected through FASTags rose sharply to more than ₹33,000 crore.

The road ministry has made use of FASTag for toll payments along national highways mandatory from midnight of 15 February 2021. So, any vehicle that passes through highways without having a FASTag is penalized through payment of twice the usual road user fees at toll gates.

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