Payments Infrastructure Development Fund
- 06 Jun 2020
- 2 min read
Why in News
Recently, the Reserve Bank of India (RBI) has announced the creation of a Rs. 500-crore Payments Infrastructure Development Fund (PIDF).
- Aim: PIDF has been created to encourage deployment of Point of Sale (PoS) infrastructure, both physical and digital, in tier-3 to tier-6 centres and north eastern states.
- The setting of PIDF is in line with the measures proposed by the vision document on payment and settlement systems in India 2019-2021.
- It is also in line with the RBI’s proposal to set up an Acceptance Development Fund which will be used to develop card acceptance infrastructure across small towns and cities.
- Corpus: It has a corpus of Rs. 500 crore in which the RBI has made an initial contribution of Rs. 250 crore. The remaining will come from the card-issuing banks and card networks operating in the country.
- Recurring contributions: The PIDF will also receive recurring contributions to cover operational expenses from card-issuing banks and card networks. RBI will also contribute to yearly shortfalls, if necessary.
- Governance: The fund will be governed through an advisory council but will be managed and administered by the RBI.
- Need: Most of the PoS terminals in the country are concentrated in tier 1 and 2 cities because of the high cost of merchant acquisition and merchant terminalisation.
- The merchant onboarding and training is a key challenge for enhancing the reach of digital payments in smaller towns and cities.
- Merchant onboarding means adding the new merchant in a payment gateway system.
- Benefit: It will give a push to digital payments across India.
- Reduce demand for cash over time.