The Reserve Bank of India (RBI) recently announced that the Payments Infrastructure Development Fund (PIDF) has been operationalised to create three million new touchpoints every year for digital payments in Tier-3 to Tier-6 centres.
According to a news report, in June last year, the RBI unveiled PIDF, which intended to subsidise the deployment of payment acceptance infrastructure in Tier-3 to Tier-6 centres, focussing on the north-eastern states.
In a statement, the central bank said an Advisory Council (AC), under the chairmanship of RBI Deputy Governor, BP Kanungo, has been constituted for managing the PIDF. It will be operational for three years, starting from this month, with a possible extension of two more years.
The fund aims to increase the payments acceptance infrastructure by adding three million touchpoints every year – one million physical and two million digital payment acceptance devices. The fund will cover multiple payment acceptance devices/infrastructure that supports underlying card payments, including physical PoS, mPoS (mobile PoS), GPRS (general packet radio service), PSTN (public switched telephone network), and QR code-based payments.
RBI explained that as the cost structure of acceptance devices vary, subsidy amounts will accordingly differ by the type of payment acceptance device deployed. The government will offer a subsidy of 30% to 50% of the cost for physical PoS, and a 50% to 75% subsidy for digital PoS.
However, payment methods that are not inter-operable would not be considered under the PIDF. The objective of PIDF is to increase the number of acceptance devices multi-fold in the country. The scheme will benefit the acquiring banks, non-banks, and merchants by lowering the overall acceptance infrastructure cost, the RBI said.
The initial corpus of the PIDF has to be substantial to initiate pan-India terminalisation and to cover the pay-outs in the first year. Contributions to the PIDF will be mandatory for banks and card networks.
RBI noted that card-issuing banks will also contribute to the corpus-based on the card issuance volume (covering both debit cards and credit cards) at the rate of IN 1 and IN 3 per debit and credit card issued by them, respectively. It aims to collect contributions by the end of January.
The report noted that besides the initial corpus, the PIDF will also receive an annual contribution from card networks and card-issuing banks. The PIDF is on a reimbursement basis and accordingly, the claim has to be submitted only after making payments to the vendor. The maximum cost of the physical acceptance device eligible for subsidy is IN 10,000 (including one-time operating cost up to a maximum of IN 500). The maximum cost of the digital acceptance device eligible for subsidy is IN 300 (including a onetime operating cost up to a maximum of IN 200).
The implementation of targets shall be monitored by the RBI with assistance from card networks, the Indian Banks’ Association (IBA), and the Payments Council of India (PCI). Acquirers must submit quarterly reports on the achievement of targets to the RBI. Acquirers meeting or exceeding their targets well in time and/or ensuring greater utilisation of acceptance devices in terms of transactions will be incentivised. Those who do not achieve their targets shall be disincentivised, by scaling up or down the extent of reimbursement of subsidies.
