2nd August, 2021 saw the advent of a new product on India’s Digital Payment landscape, the e-RUPI 2. The Prime Minister, Sri. Narendra Modi while unveiling this innovative product described it as “an innovative cashless and contactless digital payment instrument” that will boost digital transactions in the country.
What is e-RUPI?
Simply put, e-RUPI is an e-voucher. Any government or non-government organization that wants to provide financial support to any individual, can do so by issuing this e-voucher. The beneficiary will receive the e-voucher in the form of a QR Code or SMS directly to his/her verified mobile number1. Thus there is no need for the beneficiary to possess a card or a digital payments app or internet banking access to redeem the voucher with the service provider. Most significantly, the beneficiary doesn’t need a smart phone. This system works even on a basic feature phone.
Government of India initiated the Direct Benefit Transfer (DBT) Program in January, 20134. This program aimed at direct transfer of subsidies and cash benefits under various schemes to beneficiaries through Aadhar enabled bank accounts. The aim was to reduce the leakages and delays in transfer of benefits. The DBT Program achieved unprecedented success with expanding from coverage of 34 schemes in 2015 to 314 schemes by 2021 and the DBT transfer amount touching a whopping Rs.17,66,441 crore5.
DBT Transfer was done via the PFMS (Public Finance Management System) that evolved a payment and reconciliation platform integrated with 500+ banks for verification of bank account and Aadhaar seeding of bank accounts of beneficiary, with NPCI. This process was cumbersome and resulted in deficiencies including6:
- Misidentification of beneficiaries
- Extractions by middlemen
- Undue delays
- Diversion of funds for other than the intended purposes
How does e-RUPI benefit?
From the point of view of the Government, the major benefits envisaged are that it is cashless, traceable, verifiable and serves the intended purpose7. The misuse of funds can be reduced as the payment is made to the service provider only after the e-voucher is redeemed. As it is a pre-paid voucher, it ensures timely payment. While the e-voucher is launched primarily to ensure faster delivery of health care services under PMJAY (Pradhan Mantri Jan ArogyaYojana)3, it can be used for subsidies such as fertilizer subsidy payments and of course can be offered by private sector firms to their employees for health care and other benefits.
To the beneficiary, e-RUPI is convenient as there is no need for a bank account, a smart phone etc. It is a direct delivery so no intermediaries and greater chances of the beneficiary getting the funds.
While the expectations on e-RUPI are riding high, there are two big questions that everyone seems to carry8:
- Will it bring in a seamless, error free delivery of welfare services as anticipated?
- Will this be the harbinger of a new future of digital currency in India?
A lot will depend on the implementation of the system to ensure that the targeted benefits are realized. While the name of the instrument ‘e-RUPI’ (pronounced as e-rupee) misled few to assume that e-RUPI could be a digital currency, many opine that e-RUPI is to be seen more as a social service voucher system rather than a digital currency model.
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Why do you think, the launch of e-RUPI is being seen as a step towards India adopting a digital currency?
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