RBI announces guidelines for digital payment infra fund-PIDF

The Reserve Bank of India has constructed a composite Digital Payments Index (DPI) to capture the extent of digitisation of payments across the country The DPI comprises of 5 broad parameters that enable measurement of deepening and penetration of digital payments over different time periods. These parameters are – (i) Payment Enablers (weight 25%), (ii) Payment Infrastructure – Demand-side factors (10%), (iii) Payment Infrastructure – Supply-side factors (15%), (iv) Payment Performance (45%) and (v) Consumer Centricity (5%). Each of these parameters has sub-parameters which, in turn, consist of various measurable indicators.

On Tuesday (January 5) RBI announced operational guidelines for the Payments Infrastructure Development Fund (PIDF) scheme, aimed at encouraging the deployment of more digital payments infrastructure across tier-3 to tier-6 centers with a special focus on the North-Eastern States. According to the announcement, the fund constructed will be used to subsidise banks and non-banks for deploying payment infrastructure, which will be contingent upon specific targets being achieved. The PIDF will be operational for three years from 1 January 2021 and may be extended for two more years based on progress. The fund has a corpus of Rs.345 crore, of which Rs.250 crore was contributed by RBI and Rs.95 crore by authorised card networks operating in India. The card-issuing banks shall also contribute to the corpus-based on the card issuance volume (covering both debit cards and credit cards) at the rate of Re.1 and Rs.3 per debit and credit card issued by them, respectively. Besides, the turnover based – 1 bps and 2 bps i.e., 0.01 paisa and 0.02 paisa per Rupee of the transaction for debit and credit cards respectively shall be contributed by the Card issuing banks and any yearly shortfall will be contributed by RBI. Any new entrant to the card payment eco-system (card issuer and card network) shall contribute an appropriate amount to the PIDF. The fund wil be managed by the advisory council constituted by RBI under the chairmanship of B.P. Kanungo, the deputy governor of RBI.

The advisory council will devise a “transparent mechanism for allocation of targets to acquiring banks, non-banks in different segments and locations”, it said. The focus will be increasing payments acceptance infrastructure by adding 30 lakh touch points – 10 lakh physical and 20 lakh digital payment acceptance devices every year predominantly in Tier-3 to Tier -6 centers it added. The announcement further said that the primary targets of this scheme will be merchants providing essential services (transport, hospitality, etc.), government payments, fuel pumps, PDS shops, healthcare, Kirana shops (Grocery shops) who do not have payment acceptance-device, may be targeted, especially in the targeted geographies. The tentative distribution of targets (shares of distribution) across centers will be 30% tier-3 and Tier-4 centers, 60% to Tier-5 and Tier-6 centers, and 10% to the North Eastern States.

‘Multiple payments acceptance devices and infrastructure supporting card payments are covered under this scheme’ including physical PoS (point of sale terminals), mobile PoS, general packet radio service (GPRS), public switched telephone network (PSTN), and quick response (QR) code-based payments the circular said. “As the cost structure of acceptance devices vary, subsidy amounts shall accordingly differ by the type of payment acceptance device deployed. A subsidy of 30% to 50% of the cost of physical PoS and 50% to 75% subsidy for digital PoS shall be offered,” it added.

Implementation of targets under PIDF shall be monitored by RBI’s Regional Office Mumbai with assistance from card networks, the Indian Banks’ Association, and the Payments Council of India.