New Delhi: Reserve Bank of India (RBI) today make important announcements pertaining to “small value transactions” and Initial Public Offering (IPO) through Unified Payment Interface (UPI) payment system. RBI Governor Shaktikanta Das has said India’s central bank took three key decisions to further deepen digital payments, make them more inclusive, ease transactions for consumers, and facilitate greater participation of retail customers.Also Read - Big Boost For UPI Payments: RBI Soon to Launch Digital Payments For Feature Phone Users | Details Here

These are – Also Read - Paytm IPO Lesson: Should You Join Initial Public Offering Rush?

  1. RBI has proposed to launch UPI-based payment products for feature phone users, leveraging on innovative products from the RBI’s Regulatory Sandbox on Retail Payments.
  2. RBI aims to make the process flow for small value transactions simpler through a mechanism of ‘on-device’ wallet in UPI applications.
  3. RBI has decided to enhance the transaction limit for payments through UPI for the Retail Direct Scheme for investment in G-secs and IPO applications from Rs 2 lakh to Rs 5 lakh.

IPO Apply Through UPI

  • The RBI has stated, “it is reported that IPO applications of Rs 2 to Rs 5 lakh constitute approximately 10 per cent of subscription applications.”
  • The transaction limit in the UPI system was enhanced from Rs 1 lakh to Rs 2 lakh in March 2020.
  • To further encourage the use of UPI by retail investors, it is proposed to enhance the transaction limit for payments through UPI for Retail Direct Scheme and IPO applications from Rs 2 lakh to Rs 5 lakh, the RBI stated.

Small Value Transactions Via UPI

  • UPI is the single largest retail payment system in the country in terms of volume of transactions (14 crore transactions per day, October 2021)3. One of the initial objectives of UPI was to replace cash for low value transactions. Transaction data analysis shows that 50 per cent transactions through UPI were below Rs 200, indicating its success, the RBI said.
  • These low value transactions, however, utilise significant system capacity and resources, at times leading to customer inconvenience due to transaction failures because of issues related to connectivity according to the RBI.
  • It is, therefore, proposed to offer a simpler process flow by enabling small value transactions through an “On-device” wallet in UPI app which will conserve banks’ system resources, without any change in the transaction experience for the user, the RBI said.

UPI-Based Payment Products for Feature Phone

  • India has a large mobile phone consumer base of about 118 crore mobile users of which about 74 crore have smart phones indicating that there is a significant number of feature phone users in the country, according to data provided by RBI.
  • Feature phone users have limited access to innovative payment products. Although feature phones have NUUP (National Unified USSD Platform) as an option for availing basic payment services using the short code of *99#, the same has not picked up, the RBI said.
  • To deepen financial penetration, it is important to bring feature phone users into the mainstream digital payments, the RBI said.

In the first cohort of RBI Regulatory Sandbox, some innovators had successfully demonstrated their solutions for feature phone payments, under the theme of ‘Retail Payments’. These products, coupled with other complimentary solutions, will facilitate UPI-based digital payment solutions on feature phones to promote wider digitisation. It is proposed to launch a UPI-based payment product for feature phone users. Further details will be announced shortly, the RBI said in the statement. Also Read - IPO Watch: Check Policybazaar, Sigachi Industries, SJS Enterprises IPO Subscription Status