Lightweight Payment and Settlement System (LPSS) [UPSC Notes]

The Reserve Bank of India (RBI) has conceptualised a lightweight payment and settlements system. In this article, you can learn more about the Lightweight Payment and Settlement System (LPSS), its benefits, how it works and other details, for the IAS exam Indian economy segment of GS paper III.

What is the Lightweight Payment System (LPSS)?

In response to the vulnerability of existing payment systems such as RTGS, NEFT, and UPI during catastrophic events that can disrupt communication infrastructure, the RBI has conceptualised a lightweight and portable payment system that operates independently of conventional technologies, ensuring uninterrupted transactions in extreme situations.

• This system will operate independently of conventional technologies and can be managed from any location with minimal need for technology. 
• The LPSS is designed to function on minimalistic hardware and software, only becoming active when necessary. 
• It will primarily focus on processing critical transactions essential for maintaining the stability of the economy, including government and market-related transactions.

Lightweight Payment System Advantages

This will provide uninterrupted financial services even when conventional payment systems are temporarily unavailable due to disruptions in the underlying information and communication infrastructure.

• By providing near-zero downtime, this payment system aims to keep the liquidity pipeline of the economy intact. 
• It will facilitate uninterrupted essential payment services, such as bulk payments, interbank payments, and the provision of cash to participant institutions.
• The infrastructure for this system will be independent of the technologies that underlie the existing systems of payments such as UPI, NEFT, and RTGS.

How will the lightweight system be different from UPI?

Existing conventional payment systems such as RTGS, NEFT, and UPI are designed to handle large volumes of transactions while ensuring sustained availability. 

• As a result, they are dependent on complex wired networks backed by advanced IT infrastructure.
• Catastrophic events like natural calamities and war have the potential to render these payment systems temporarily unavailable by disrupting the underlying information and communication infrastructure.
• But the LPSS would make minimal use of technology and hence can be used at the time of disaster as well. 

Lightweight Payment and Settlement System (LPSS):- Download PDF Here