budget 2021: Budget 2021: RBI support could cut cost for deploying payment terminals in rural India

Economy


MUMBAI: The central bank’s newly established corpus of Rs 345 crore for developing payment infrastructure in rural India could ease the unit economics for key stakeholders to deploy terminals in the absence of Merchant Discount Rate (MDR).

However, key stakeholders – the banks and payment companies — would continue to demand the resumption of transaction charges albeit a discounted one, on UPI and RuPay, in the upcoming union budget.

The Reserve Bank of India (RBI) on Tuesday announced the operationalization of the Payment Investment Development Fund (PIDF) with an initial corpus of Rs 345 crore for three years – extendable up to an additional two more years.

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The objective of PIDF is to increase the number of acceptance devices multi-fold in the country, the central bank said in a notification. According to Vishwas Patel, the chairman of the Payment Council of India (PCI), the scheme will boost payment acceptance in untapped regions.

“This support from the RBI will motivate the industry to set targets for itself and unveil the potential of the targeted geographies in a great way,” said Patel, who is also a member of the ex-officio Advisory Council for the scheme.

A senior official of the payments industry said that the PIDF cannot be viewed as an alternative to MDR as the revenue mismatch, estimated by the NPCI earlier this year at nearly Rs 2000 crore due to the absence of MDR, is much higher than the newly operationalized corpus.

“Most players in the core business of payments are operating on losses. But PIDF is a positive move that’ll hugely benefit the digital payments penetration in hinterlands,” the official said, requesting anonymity. “The industry will continue to demand a revised MDR even if it’s a discounted one.”

To be sure, MDR is the fee accrued by banks, generally levied from the merchants processing the transactions. It is shared equally among the acquiring bank, fintech partner and issuer bank, which then pays a 10% switching fee to networks like NPCI.

This fee was waived last year on transactions through NPCI’s RuPay and UPI modes to “incentivise” small merchants to adopt the digital mode of payments.

The fund will be used for adding 30 lakh digital payment touch points every year which would include 10 lakh physical and 20 lakh digital payment acceptance devices. This will be done with a special focus on tier 3 to tier 6 regions and the north-eastern states, the central bank said on Tuesday.

The scheme will subsidize acquiring banks based on the fulfilment of the target set by the central bank. A subsidy of 30% to 50% of cost of physical PoS and 50% to 75% subsidy for Digital PoS shall be offered.

B P Kanungo, Deputy Governor, Reserve Bank of India is the chairman managing the fund, according to the central bank.

According to Dilip Modi, founder of Spice Money, a rural fintech firm, PIDF could improve rural banking infrastructure in India.

“The introduction of RBI’s PIDF Scheme will provide a big boost to financial advancement in India’s semi urban and rural economy, especially at a time when this segment needs immediate support to jump back into the economy,” said Modi.

“Accessibility and availability of financial services are major challenges that hamper financial inclusion of rural and underserved segments,” he added.



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