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Reserve Bank sets up digital payments infra fund of Rs. 500 crore

The initial contribution of Rs. 250 crore to the PIFD has been made by the central bank while the other half of the fund is expected to be contributed by all card-issuing banks and the network operators.

Jun 6, 2020 10:30 IST
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The Reserve Bank of India announced on June 5 that it has set up a Payment Infrastructure Development Fund (PIFD) of Rs. 500 Crore. The fund will improve and support the development of the digital payments ecosystem in the northeast and rural districts in India.

The initial contribution of Rs. 250 crore to the PIFD has been made by the central bank while the other half of the fund is expected to be contributed by all card-issuing banks and the network operators.

The fund set up by the central bank will be governed through an advisory council and it will be administered and managed by the Reserve Bank of India.

Objective of PIFD:

The objective of the Payment Infrastructure Development Fund (PIFD) as mentioned by the Reserve Bank of India has been to encourage acquirers to deploy Points of Sale (PoS) infrastructure in both the digital and physical modes in tier-3 to tier-6 centers and northeastern states.

RBI statement on PIFD:

Reserve Bank of India in a press release stated that over the years, the payments ecosystem in India has evolved with a wide range of options such as mobile banks, bank accounts, cards, etc. To provide a boost to the digitisation of payment systems, it has become necessary to give impetus to acceptance infrastructure across the country and more importantly in underserved areas.

PIDF will also receive annual recurring contributions to cover the operational expenses from the card-issuing cards and bank networks, while RBI will also be making contributions from time to time to cover for yearly shortfalls.

Background:

Payment companies and ecosystem players had raised concerns earlier following the Finance Ministry’s decision to waive off Merchant Discount rate on RuPay and UPI instrument the deployment of POS machines would take a hit.

They also claimed that without any monetary incentives, payment companies and banks will be reluctant to deploy their machines and acquire merchants in the rural zones as the cost of maintenance has been higher.

Merchant Discount Rate of MDR is the fee charged by acquiring banks from the merchants for providing payment services. The fee was earlier waived off for select National Payments Corporations of India operated instruments in January 2020.

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