Syllabus: General Studies Paper 3
Recently, PM launched an electronic voucher-based digital payment system “e-RUPI”
- The platform has been developed by the National Payments Corporation of India (NPCI), Department of Financial Services, Ministry of Health and Family Welfare and the National Health Authority.
- It will be a person-specific and purpose-specific payments system.
Working of the e-RUPI:
- The e-RUPI system is accessible to anyone with a mobile phone, even if the recipient does not have a bank account.
- It comes in the form of one-time use e-vouchers to access government health services.
- It could gradually be implemented to cover welfare services the beneficiary is already receiving from different government agencies.
- It is a cashless and contactless digital payments medium, which will be delivered to mobile phones of beneficiaries in the form of an SMS string or a QR code.
- This will essentially be like a prepaid gift voucher that will be redeemable at specific accepting centres without any credit or debit card, a mobile app or internet banking.
- e-RUPI will connect the sponsors of the services with the beneficiaries and service providers in a digital manner without any physical interface.
- Beneficiaries will be identified by their mobile numbers, and the e-vouchers will be sent to their phone through the bank’s voucher management system.
Process of issuing vouchers:
- The system has been built by NPCI on its UPI platform and has onboarded banks that will be the issuing entities.
- The service has authorised 11 banks to issue digital vouchers; these include both private and public banks.
- Any corporate or government agency will have to approach the partner banks, with the details of specific persons and the purpose for which payments have to be made.
- Avouchers allocated by a bank to the service provider in the name of a given person would only be delivered to that person.
Uses of e-Rupi:
- According to the government, e-RUPI is expected to ensure a leak-proof delivery of welfare services.
- The contactless prepaid payment system can be issued by both government agencies and corporate entities to a specific individual to avail a targeted service.
- The Union government plans to use e-RUPI for its COVID-19 vaccination drive for citizens and gradually implement it as part of other government schemes such as:
- It can also be used for delivering services under schemes meant for providing drugs and nutritional support under:
- Mother and Child welfare schemes,
- TB eradication programmes,
- Drugs & diagnostics under schemes like Ayushman Bharat Pradhan Mantri Jan Arogya Yojana, fertiliser subsidies etc.
- Public Distribution System (PDS) and fertilisers.
- Universal Basic Income (UBI)
- To begin with, the NPCI has tied up with more than 1,600 hospitals where e-RUPI can be redeemed.
- Its immediate and first-use case is to facilitate cashless service at paid Covid vaccination centres (CVCs).
- For instance, corporations and philanthropies can buy services in bulk to vaccinate employees and those in need.
- The intended beneficiaries will receive an SMS or QR code on their feature/smartphone, redeemable for cashless vaccination at participating centres.
- A single-source MIS gets created effortlessly at the back end.
- The beneficiary will then need to show it to the welfare service provider to authenticate the transaction.
- The utility of cash transfers to guarantee food security or generate sustainable livelihoods compared to PDS or MGNREGA, for instance, is considered suspect for its use.
- Another application is in basic income support.
- The lockdowns to contain the pandemic exposed the poor to acute distress, due to loss of means of livelihood.
- e-RUPI can mitigate their stress by rapidly distributing food and cash vouchers at scale.
- A similar application of e-RUPI can be envisaged for the Ayushman Bharat healthcare initiative.
- Beneficiaries will receive e-RUPI vouchers of designated value tenable at empanelled healthcare facilities, providing them portability and facility choice.
- The service provider will benefit from the immediate payment.
- Citizens do not have to carry any printout, and as these vouchers are created for a specific purpose, they cannot be transferred or cashed out.
- The government also stated that even the private sector can leverage these digital vouchers as part of their employee welfare and corporate social responsibility programmes.
Corporate applications of e-RUPI includes:
- Scrupulous disbursement and easy compliance of providing employee benefits with tax implications such as meals, education, travel and health.
What is the significance of e-RUPI and how is it different from a digital currency?
- The government is already working on developing a central bank digital currency and the launch of e-RUPI could potentially highlight the gaps in digital payments infrastructure that will be necessary for the success of the future digital currency.
- In effect, e-RUPI is still backed by the existing Indian rupee as the underlying asset and the specificity of its purpose makes it different to a virtual currency and puts it closer to a voucher-based payment system.
- The e-RUPI is built for a specific transaction to avail a service at a particular welfare centre.
- The digital vouchers have a one-time use case and they can’t be transferred.
- This puts e-RUPI within a voucher-based payment system rather than a virtual currency.
- But the government’s move could be a good starting point to experiment with digital currency.
- It can be a preamble to a digital currency, but it may not directly be the platform that is used for the digital currency because UPI will be the overlay on top and below it can be an actual or digital currency.
- A 2018 research by Harvard University revealed a 33-percentage point gender gap in mobile phone ownership in India.
- In their study, the authors point to the economic and normative barriers as important drivers of the mobile gender gap.
- They also note that the disparity exists across Indian society, and is not limited to rural, less educated or poorer groups.
- In the same study, even among men, only 71% owned a cell phone, an essential device to access digital schemes like the e-RUPI vouchers.
- Online data portal Statista pegs India’s smartphone penetration rate at 42% in the financial year 2020 and estimates it to reach 51% by 2025.
- Closing the mobile gender gap and enabling a large proportion of citizens to own a mobile phone will remain a problem to be solved.
- The Aadhaar experience suggests ownership must vest with a specific agency.
- Without the UIDAI nurturing its applications within the government and the private sector, the widespread adoption of the Aadhaar would not have been possible.
- Making the distribution and acceptance of e-RUPI incentive-compatible is recommended, as demonstrated by the popularisation of prepaid telephony by the telecom industry.
The need for the e-RUPI:
- Also, the ubiquitousness of e-RUPI in the future will depend on the end-use cases.
- The e-RUPI is a digital voucher that can be redeemed by beneficiaries to avail themselves of a specific service.
- The digital platform does not require a card, app or internet access to redeem an e-voucher.
- The e-vouchers can be issued by the government or private entities to the beneficiaries through QR codes or long-string SMS.
- The service is aimed at plugging holes in the existing welfare payment disbursement system.
- The idea here is to track and trace how the subsidies and benefits given to citizens are used.
- With e-RUPI, government agencies can keep track of how much of the allocated funds have been disbursed to citizens.
- Otherwise, carrying out reconciliation for unused subsidies could be an accounting nightmare for the government.
Benefits of e-RUPI:
- e-RUPI could break the policy logjam by making cash transfers purpose- and person-specific, freeing them from dependence on bank accounts and providing visibility from the time of issue until redemption.
- e-RUPI could make the PDS programme more efficient.
- The inefficiency of the programme is rooted in high overhead costs, leakages, exclusion and inefficiencies.
- A food-specific e-RUPI voucher will allow beneficiaries to buy rations from an outlet of their choice.
- The value addition beyond the One Nation, One Ration Card will come from removing price distortion and the redemption of the voucher at market price by merchants within and outside the PDS network.
It could also be used to streamline fertiliser subsidies to farmers.
- e-RUPI will enable farmers to buy fertiliser at nominal prices with direct credit of the subsidy amount into the account of the authorised dealers.
- As far back as 2011, a task force on direct transfer of subsidies on kerosene, LPG and fertilisers headed by Nandan Nilekani had suggested a roadmap for direct cash transfer of fertiliser subsidies in a phased manner.
- Its recommendations on the LPG subsidy got implemented with desired results.
- The ones relating to fertilisers have not happened.
- The e-RUPI will allay apprehensions about creating an IT infrastructure, managing nearly 3,00,000 fertiliser sale points, the collapse of dealer network due to liquidity squeeze in the event of subsidy payments getting delayed and a complex system of timely credit of subsidy into an estimated 129 million Aadhaar-linked bank accounts of farm households.
e-RUPI is almost custom-designed for school voucher programmes.
- The efficacy of these programmes is well established in many countries. Identified students receive vouchers to pay school fees and expenses at empanelled institutions of their choice, public and private, which compete to get full fee-paying students:
- The resultant option and competition benefit students and schools while enhancing transparency and accountability.
Digital currency in India:
- According to the RBI, there are at least four reasons why digital currencies are expected to do well in India:
- There is the increasing penetration of digital payments in the country that exists alongside sustained interest in cash usage, especially for small value transactions.
- India’s high currency to GDP ratio,according to the RBI, holds out another benefit of Central bank digital currency (CBDCs).
- The spread of private virtual currencies such as Bitcoin and Ethereum may be yet another reason why CBDCs become important from the point of view of the central bank.
- CBDCs might also cushion the general public in an environment of volatile private VCs.
Light regulation and the opening of e-RUPI to the competition will spur innovation and adoption. All banks, small and big, NBFCs, non-bank PPI issuers, and telcos may be allowed to issue it later. e-RUPI opens up a world of opportunities to the government, people, and businesses to provide, avail and pay for services seamlessly.
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