India’s one step closer to the digital world: Is it the right thing to do?

No alt text provided for this image

e-RUPI is introduced by NPCI (National Payments Corporation of India) in association with Department of Financial Services (DFS), National Health Authority (NHA), Ministry of Health and Family Welfare (MoHFW), and partner banks, on its Unified Payments Interface (UPI) platform, to bridge the financial gap through an innovative digital way. 

What is this e-RUPI? Is it the digital currency the central government proposed to launch?

You know the vouchers you get on Paytm, or Gpay, or you also buy the Amazon Gift Vouchers etc., right? So, e-RUPI is something similar. A gift voucher given by the government for a specific purpose. So, although it is a digital form of payment, it is NOT a Digital Currency or a CryptocurrencyLet me explain it in detail. In short, it can be called the Voucher-based payment system of India

Now, let us say, you apply to get the COVAXIN Vaccine. Although now it is free, earlier you would have to Pay. So, if the government starts implementing the e-RUPI, it will send the SMS or QR code to the beneficiary, that is you, after you register. Now, you can just go to any authorized center, show the QR code or SMS and get it redeemed and get your Vaccine Shot.

Seems complicated? 

Without e-RUPI

Okay in a simple manner, a class 10 student applied for a scholarship. Now the government is transferring the money into the bank account of the student. With this, the student has to go to the bank and withdraw the money. And the government cannot track if the money withdrawn by the student is used only for his study purpose or his/her parents have used that money for some other process. 

With e-RUPI

The government sends a QR code or SMS (if there is no smartphone, this facility can be used) to the mobile number of the student. The student has to just go to the school or the hostel for whatever purpose he applied for the scholarship and just show that QR code / SMS. It will  be verified with the OTP and the required products / services will be provided to that student. 

How simple, right? You need not go to the bank and withdraw money. In fact, you need not even  use your debit card or anything. All you need to have is a mobile phone.

This contactless e-RUPI is easy, safe and secure as it keeps the details of the beneficiaries completely confidential. As we saw, the student need not share his personal details with the organization to redeem the voucher code he received through SMS / QR Code. The entire transaction process through this voucher is relatively faster and at the same time reliable, as the required amount is already stored in the voucher. That is the voucher is already pre-paid by the government or the organization. It is the same as an Amazon gift card.

How does this impact the economy?

All the transactions done through e-RUPI are tracked and there is no scope for leakage from the system. The requirement by the RBI to print more money is reduced. Thus, inflation can be handled in a more controlled way. We used to hear of many scams that happened earlier wherein the funds are being misused. In the case of e-RUPI, the term ‘misuse of funds’ does not have a place in its dictionary as all the transactions are pre-defined.

One can use the voucher only for the purpose it is defined for and only for the amount that has been decided hitherto. Thus ensuring a leak-proof mechanism for the welfare schemes of the government such as providing medicines and nutritional support to children, pregnant women and lactating mothers under Mother and Child welfare schemes, medical services under schemes like Ayushman Bharat Pradhan Mantri Jan Arogya Yojana, fertiliser subsidies etc. This helps curb the problem of Black Money and taxation avoidance. As all the transactions are recorded, there is no scope of tax evasion. This boosts up the tax collection rate and increases transparency in the accounts which in return, makes all the transactions clear and transparent, helping everything to be included in the Economy. This is like a booster dose to the Indian Economy. e-RUPI ensures more inclusion and thus more increase in GDP (Gross Domestic Product) of India.

With lot of pressure from various sections of the society to introduce digital currency, although e-RUPI is not a digital currency, it is in some form bridging the gap to address the problems faced by the tech era.

e-RUPI is a transitory phase of the entire revolutionary phase of the digital currency, the Central Bank Digital Currency that the RBI is working on developing. (Although we never know how long it might gonna take). It is One leap forward into the digital economy reducing the cash usage and transactions by a greater amount. Thus e-RUPI paves a way to the success of Digital India.

Why e-RUPI

When we already have DBT, why do we need some other thing?

  1. For the beneficiary to claim DBT, he/she should have a bank account and Aadhar card and both should be linked.
  2. Payment failures in many instances done through DBT
  3. Name mismatch in Bank records, Aadhar card and the concerned ministry.
  4. Only the government can use DBT 
  5. Inoperative / dormant Bank Accounts.

Even though some of the issues of DBT are addressed, it does not solve the problem because the lack of banking connectivity in remote places is one of the many other such issues. 

Who are the stakeholders?

Everyone! Yes, I say everyone is a stakeholder. The government to Corporates, everyone can use e-RUPI.

How does it help the corporates?

  • Can take care of the well-being of their employees by issuing vouchers for specific purposes.
  • End to end digital transaction. Therefore there is no need for physical issuance and this in turn reduces the cost. And can track their CSR (Corporate Social Responsibility) programs.
  • The employer or the organization can track the voucher redemption.
  • The vouchers are distributed through SMS / QR code therefore, it is quick, safe & contactless.

How does it help the hospitals?

  • Every voucher has to be authorized only through a verification code, it is Easy and Secure
  • Contactless payment as no card / cash is required. 
  • The voucher is redeemed very quickly and there are very less chances of rejection as the vouchers are pre-paid.

How is it actually implemented in real-time

  1. The issuer of the voucher partners up with any bank that would transact the e-RUPI and get a voucher code for the required amount and for the required product / service.
  2. The issuer distributes the voucher to the beneficiary through SMS / QR code.
  3. The Beneficiary would show the SMS / QR code at the service / product receiving merchant or organization. (There is no need to carry a print out of the voucher)
  4. Note:
  5. 1. The Beneficiary need not share his/her personal information during redemption and thus, Privacy is ensured.
  6. 2. The Beneficiary need not have any digital payment app or bank account
  7. The merchant or the organization gets the required amount directly in their bank account as the voucher is already prepaid.

As of now, the Banks that are partnered with NPCI for e-RUPI are as in the following table.

Challenges to implement e-RUPI

Lack of Mobile Connectivity.

  • There are around 55,619 villages in the country that do not have mobile coverage.
  • And according to a World Bank report in 2017, only around 69% of Adults have a mobile phone.

And the Gender Gap is also very significant in mobile phone access. And all those who lack the mobile phone are the ones who are in most need of the welfare schemes of the government. Under the Digital India initiative, the Department of Telecommunications working as the nodal agency is working to bridge this gap and provide mobile connectivity access to all these areas, especially the North-East. 

Thus, all the Digital India initiatives and projects, working in synchronous way can pave the path for the successful implementation of e-RUPI and make the effort of the Government to bring in Digital Currency a smooth one.

DISCLAIMER: The author is solely responsible for the views expressed in this article. The author carries the responsibility for citing and/or licensing of images utilized within the text.