Earlier Indian government developed a Direct Benefit Transfer payment system, shortly DBT by NPCI, that directly transfer money to the beneficiary account without any third party. Things to worry about to know the benefit used for a given purpose only, so the government runs some rules on DBT like gas cylinder subsidy. Now the government works on one step further advance from DBT, where no need for any bank account, transaction and benefit directly delivered to the beneficiary.
image from NPCI
The Prime Minister of India Narendra Modi launched the first electronic voucher-based digital payment system ‘e-RUPI’ on Monday 2 August 2021. It is the first step towards digital currency which will boost the digital payment system. e-RUPI platform has been developed by NPCI (National Payment Corporation of India) in collaboration with the Department of financial services, Ministry of health and family welfare and the National Health Authority, will be a person-specific and purpose-specific payment system.
What is it and how does it work?
- e-RUPI is a cashless and contactless digital payment mode, which will be delivered to the mobile of a beneficiary in the form of an SMS or QR code-string based e-voucher. This will essentially be like a prepaid gift voucher that will be redeemable at specific accepting centres without any credit or debit card, a mobile app or internet banking. For complete payment at the accepting centre, the beneficiary QR code or SMS is scanned and then verify through a code from the beneficiary mobile number. e-RUPI connects ‘beneficiary and sponsors of the services’ and ‘service providers in a digital manner without any physical interface. It also ensures that the payment to the service provider is made only after the completion ODF transaction. It will be a person and purpose-based payment system.
How will the vouchers be issued?
- e-RUPI system developed by NPCI on its UPI platform and all banks will be the institution to issue this system. Any corporate or government agency (which is a lender in the Public or private sectors) will have to approach the partner banks with the details of specific persons and the purpose of payment to be made. The beneficiaries will be identified through their mobile numbers and a voucher will be issued to the service provider from the bank which will be allotted directly to that person only on whose name it will be issued.
Presently live with e-RUPI partners together with banks are─ Axis Bank, Bank of Baroda, Canara Bank, HDFC Bank, ICICI Bank, Indusind Bank, Indian bank, Kotak Bank, Punjab National Bank, State Bank of India, Union Bank of India, Pine Labs, Bharat Pay. In future, a lot of partners will be live with the e-RUPI system.
To check presently live bank on e-RUPI click heređŸ‘‰ e-RUPI Live Partners (npci.org.in) & live hospitals click here đŸ‘‰ live-hospitals.pdf (npci.org.in)
Uses and significance of e-RUPI
- e-RUPI will be used for good governance and will ensure leak-proof delivery of various welfare services. It can also be used for services under schemes like Ayushman Bharat Pradhan Mantri Jan Arogya Yojana, Maternal and Child welfare schemes, TB eradication programmes, drugs and nutritional assistance schemes. These digital vouchers can also be used by private sectors for the welfare of their employees and corporate social responsibility programmes. Even if one does not have a bank account or a digital payment app or a smartphone can benefit from these vouchers. The government is also planning to launch the digital currency of RBI & the launch of e-RUPI will help in the assessment of the capacity of digital payments.
The government is already working on developing a central bank digital currency & the launch of e-RUPI could potentially highlight the gaps in digital payment infrastructure that will be necessary for the success of the future digital currency. In effect, e-RUPI continues to be backed by the existing Indian rupee as the underlying asset & the specificity of its purpose makes it different to a virtual currency and puts it closer to a voucher-based payment system. Also, the obsequiousness of e-RUPI in the future will depend on the bend-use cases.
Examples of the voucher-based welfare system
- America, along with several other countries like Colombia, Sweden, Chile, Hong Kong etc school voucher system is being used.
- There is a school voucher or education voucher system in the US, which is a certificate of government funding for students.
- It is a type of special subsidy given directly to the parents of students to educate their children.
Other advantages
- The person who is buying the vouchers and issuing them to others can track the utilisation of the vouchers.
- Privacy is another issue as the beneficiaries won’t share their details.
- the e-RUPI system is useful and convenient for small beneficiaries and transactions.
- the e-RUPI system is a frontend, transparent and will increases the growth of money velocity.
What are the plans for CBDC (Central Bank Digital Currency)?
- The Reserve Bank of India had recently said that it has been working toward a phased implementation strategy for central bank digital currency. While in the past, RBI governor Shaktikanta Das had flagged concerns over cryptocurrencies, there seems to be a change of mood now in favour of central bank digital currencies on Mint Street. Although central bank digital currency would involve changes to the enabling the legal framework since the current provisions are primarily synced for currency in paper form.