Q. What is this news?
A. In an effort to give a push to digital payments across the country, the Reserve Bank of India (RBI) is setting up a Payment Infrastructure Development Fund (PIDF) of Rs 500 crore.
Q. What is the objective of the fund?
A. This fund has been created to encourage acquirers to deploy point of sale (PoS) infrastructure, both physical and digital, in tier-3 to tier-6 centres and north eastern states.
Q. What is the source for contributions to the fund?
A. The RBI has made an initial contribution of Rs 250 crore covering half the fund. The remaining will come from the card issuing banks and card networks operating in the country.
Q. What about management of the fund?
A. The fund will be governed through an advisory council but it will be managed and administered by the RBI.
Q. What is need for fund and what is its significance?
A. Over the years, payments ecosystem in the country has evolved with a wide range of options such as bank accounts, mobile phones, cards, etc.
To provide further fillip to digitisation of payment systems, it is necessary to give impetus to acceptance infrastructure across the country, more so in underserved areas.
The fund is also in line with the measures proposed by the vision document on payment and settlement systems in India 2019-2021.
The enhanced ability of PoS infrastructure is supposed to reduce demand of cash over time. By 2021, there will be around 5 million active PoS by 2021.
Q. What is Acceptance Development Fund proposed last year?
A. In a similar move, last year, the RBI had also proposed to set up an Acceptance Development Fund which will be used to develop card acceptance infrastructure across small towns and cities.
The Fund will be used to ensure growth of card acceptance infrastructure such as swipe machines across the country particularly in Tier III and Tier VI cities.