India takes first step towards its own digital currency with e-Rupi

India takes first step towards its own digital currency with e-Rupi
India is now the Asia’s biggest destination for fintech deals.Courtesy: Getty Images

Giving India’s booming fintech sector another boost, Indian Prime Minister Narendra Modi launched e-Rupi, a digital voucher platform scheme that can transform the way Indians access and pay for a host of government services. It is also open to the private sector for payment to employees. This will accelerate the adoption of digital payments across India.

India, which has emerged as one of the world leaders in fintech, took the first step towards having its own digital currency with the launch of the e-Rupi digital payments platform by Indian Prime Minister Narendra Modi on Monday.

This will be a revolutionary initiative in the direction of ensuring leak-proof delivery of welfare services, the Prime Minister’s Office (PMO) said in a statement.

The e-Rupi will essentially be like a prepaid gift-voucher that are redeemable at specific accepting centres without any credit or debit card, a mobile app or internet banking. In an economy that is still largely cash-dependent, this new platform is expected to further encourage and accelerate the adoption of digital payments and bring this ratio down.

Like a prepaid gift voucher

“Today, the country is giving a new dimension to digital governance. e-Rupi voucher is going to play a huge role in making digital transactions and DBT more effective. This will help everyone in targeted, transparent leakage-free delivery,” Modi said at the launch of the platform.

The e-Rupi will essentially be like a prepaid gift-voucher that are redeemable at specific accepting centres without any credit or debit card, a mobile app or internet banking. e-Rupi, which has been developed by the National Payments Corporation of India (NPCI) in collaboration with the Department of Financial Services, Ministry of Health & Family Welfare and National Health Authority, will connect beneficiaries and service providers digitally, i.e., there will be no necessity for any physical contact between them. The platform is, thus, a person and purpose-specific payments platform.

e-Rupi could encourage adoption of digital payments

In an economy that is still largely cash-dependent, despite the government’s efforts to digitise the economy, as seen from the high cash-to-GDP ratio of 14.7 per cent – a two-decade peak – according to data from the Reserve Bank of India (RBI), this new platform is expected to further encourage and accelerate the adoption of digital payments and bring this ratio down.

Besides being a cashless, contactless, one-time digital payments platform that connects service sponsors and beneficiaries digitally and ensures leak-proof delivery of various welfare services, the salient features of e-Rupi are that it is a QR code or SMS string-based e-voucher, which is delivered to the mobile of the beneficiaries.

Safety built into platform

As mentioned above, beneficiaries will be able to redeem their voucher(s) without a card, digital payments app or internet banking access, at the service provider. Such beneficiaries will be identified using their mobile number and a voucher allocated by a bank to the service provider in the name of a beneficiary will be delivered only to that individual.

Apart from regular payments, it can also be used for services under government schemes for providing medicines and nutritional assistance under maternal and child welfare schemes, TB eradication programmes, medicines and diagnostics and for flagship initiatives like Ayushman Bharat Pradhan Mantri Jan Arogya Yojana, fertiliser subsidy, education grants, cooking gas subsidies and other welfare schemes.

Besides being a cashless, contactless, one-time digital payments platform that connects service sponsors and beneficiaries digitally and ensures leak-proof delivery of various welfare services, the salient features of e-Rupi are that it is a QR code or SMS string-based e-voucher, which is delivered to the mobile of the beneficiaries.

Private sector can also use platform

The e-Rupi platform is not restricted for use by government agencies only. The private sector can also utilise this payments platform for its employee welfare and corporate social responsibility programmes,

Safety is built into the platform as it ensures that the payment to the service provider is made only after the transaction is completed and being pre-paid in nature, it assures timely payment to the service provider without the involvement of any intermediary.

The Modi government’s laser focus on the fintech sector has had a positive spin-off for the private sector, especially start-ups.
The Modi government’s laser focus on the fintech sector has had a positive spin-off for the private sector, especially start-ups.Courtesy: Getty Images

Industry reacts positively

“This is the next best step to take the high end of tech to the bottom of the pyramid. It will help the government dispense specific policy benefits to identified user segments without any misuse of the funds or delay. The funds will not need to move around in banks but the beneficiary can directly go to end point to avail the intended benefit,” said Anand Kumar Bajaj, Founder & CEO, PayNearby, a digital payments company.

“The launch of e-RUPI is a landmark move by PM Modi to bring technology into the hands of billions, specially at the last mile. There have been many conversations around ensuring leak-proof welfare to beneficiaries by leveraging new-age tech, however, the launch of e-RUPI today makes India a global pioneer in the digital payments ecosystem,” said Dilip Modi, Founder, Spice Money, another digital payments start-up.

In line with encouraging digital payments

Since coming to power in 2014, the Modi government has proactively encouraged the digitisation of the economy and especially of payments. It launched the Jan Dhan Yojana, the world’s largest financial inclusion programme, which has enabled the government to transfer benefits like subsidies, scholarships, income support, etc., directly to millions of beneficiaries without any physical contact between government officers and the beneficiaries. This has plugged leakages, reduced corruption and saved the government almost $25 billion that was earlier being siphoned off by middlemen and vested interests.

The PMO underlined Modi’s initiatives to encourage digital initiatives and pointed out that several such programmes have ensured that government benefits now reach beneficiaries in a targeted and time-bound manner without any leaks. The e-Rupi voucher takes forward this vision of good governance, the PMO added.

The e-Rupi platform is not restricted for use by government agencies only. The private sector can also utilise this payments platform for its employee welfare and corporate social responsibility programmes.

India biggest destination for fintech deals

This laser focus on the fintech sector has had a positive spin-off for the private sector, especially start-ups. India is now the Asia’s biggest destination for fintech deals. According to RBSA Advisors, investments in the country’s fintech sector cross $10 billion over the four-and-a-half-year period between 2016 and the first half of 2020.

It should, however, be noted that e-Rupi is not a digital currency, but only the first step towards the launch of a Central Bank Digital Currency (CBDC). The government and the RBI are believed to be working towards such a digital currency and e-Rupi could highlight the shortcomings of India’s digital payments backbone; and this can be critical for the success of the CBDC whenever it is launched.

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