Offline Digital Payments - RBI

The Reserve Bank of India (RBI) announced a framework on 3rd January, 2022 that allows offline payments of up to Rs. 200 per transaction, subject to a total limit of Rs 2,000, in order to encourage digital transactions in rural and semi-urban regions. The move is aimed to further the efforts of financial inclusion in India. It’ll not only encourage the transition to a cashless economy but would also result in increased indirect tax revenue to the government due to reduction of tax evasion.

The topic has a very high chance of being asked as a UPSC Prelims Economics Question or as a Current Affairs Question, as it has been in the news recently.

Note: UPSC 2022 is approaching closer, supplement your preparation with the free Daily Video Analysis of The Hindu Newspaper by BYJU’S.

About the Framework

  • A transaction which does not need internet or telecommunication connectivity is referred to as an offline digital payment.
  • Payment can be done face-to-face (proximity method) through any medium or instrument, such as cards, wallets, and mobile devices, in the offline mode.
  • The Reserve Bank of India (RBI) stated that these transactions would not need an additional factor of authentication (AFA), and that because the transactions occur offline, the payer will get alerts (through SMS and/or email) after a short time lag.
  • Until the account balance is replenished, transactions are subjected to a cap of Rs. 200 per transaction and a total maximum of Rs. 2,000 for all transactions. Only in an online mode can the account balance be replenished.
  • The framework takes into account input from pilot testing on offline transactions that took place in various parts of the country between September 2020 and June 2021.
  • According to the “Framework for Facilitating Small Value Digital Payments in Offline Mode”, the offline mode of transaction can be enabled after getting the customer’s explicit consent.
  • Customers will continue to be protected under the terms of circulars that limit customer’s liability and will be able to seek redress through the Reserve Bank Integrated Ombudsman Scheme.
  • Such card transactions should be permitted without the need to activate the contactless transaction mechanism.
  • All liabilities stemming from technical or transaction security vulnerabilities at the merchant’s end will be borne by the acquirer/issuer (banks and non-banks).
  • As soon as transaction data is received, the issuer must send transaction alerts to customers. There is no requirement to issue an alert for each transaction; nonetheless, each transaction’s data must be clearly communicated.

List of Current Affairs Articles for UPSC

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Advantages of Offline Digital Payments

The biggest and foremost advantage of the new framework is that it’ll lessen the reliance of the Indian economy on physical cash notes and its transition towards a Cashless Economy, which will also save the cost of printing them and other related activities. It’s a technological innovation as it enables the customers living in remote rural or suburban areas with poor internet or telecom connectivity to make use of digital modes of payments, this is helpful for them as the availability of ATMs and banks is scarce numbers in such regions, filling of ATMs with cash also gets obstructed due to many reasons.

Even though it’s an offline mode of payment, it’ll lessen tax evasion by the merchants even if they don’t issue bills which is a general practice in such regions, because it’s a digital mode of payment, and every transaction is recorded by the issuer/acquirer. This step has the potential to increase the Goods and Services Tax (GST) collection from such regions.

Note: To read more on National Strategy for Financial Inclusion, visit the linked article.

Note: You may get all the Economy Questions of the UPSC Mains exam by visiting the linked article.

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