Saturday, September 25, 2021

E-RUPI: Digital currency to transform providing welfare services

By: Dr. RUDRANI BHATTACHARYA, Assistant Professor, NIPFP, New Delhi
In the current decade, digitization of most of the systems has emerged as a major policy breakthrough in India. With the same temperament, Prime Minister Narendra Modi launched e-RUPI, an electronic voucher-based digital payment system on August 2, 2021, as a first step towards introducing digital currency in India. The main purpose of having this electronic payment platform is to facilitate the government to provide welfare scheme-based supports directly to the citizens in a “leak-proof manner.”
A digital currency is one that exists exclusively in electronic form. The major difference between the digital currency and the present form of the electronic banking system is that the present system allows converting an electronic record of a bank account holder’s currency holding in a bank to physical currency, for example, rupees withdrawn via an ATM card. On the contrary, digital currencies are intangible and recorded on a distributed database on the internet, a centralized electronic computer database owned by a company or bank in the form of digital files. Different forms of digital currencies used around the world are cryptocurrency, virtual currency, and central bank digital currency.
e-RUPI is a cashless, contactless digital payment platform through which a pre-paid voucher can be issued directly to beneficiaries of welfare schemes after verifying the mobile number and identity of the beneficiary. These vouchers will be issued in the form of Quick Response (QR) code or SMS string-based e-vouchers to the beneficiary’s mobile number. The main purpose is to connect the sponsors of services, in this case, the government, service providers, and beneficiaries via a digital platform with the total absence of a physical interface among them.
The pre-paid e-voucher can be used only once by the person on whose identity it has been issued. However, the voucher is redeemable at the service provider without any credit or debit card, mobile app, or internet banking. The main advantage is that the e-RUPI vouchers can be issued to any kind of mobile phone with a valid mobile number, and hence not restricted to smartphone users with internet accessibility.
Since no direct link between the beneficiary and banking system is required for utilizing e-RUPI, this platform enables direct transfer of social security benefits to the section of the population not having access to banking and other financial services.
The e-RUPI system is developed by the National Payments Corporation of India (NPCI) on its Unified Payments Interface (UPI) platform, in collaboration with the Department of Financial Services (DFS), National Health Authority (NHA), and Ministry of Health and Family Welfare (MoHFW). There are eleven banks on board that play the role of issuing entities. Among these eleven banks, State Bank of India, ICICI Bank, HDFC Bank, Punjab National Bank, Axis Bank, and Bank of Baroda extend full support to issue e-RUPI coupons as well as redeem them. The rest of the banks, such as Canara Bank, Indusind Bank, Indian Bank, Kotak Bank, and Union Bank of India can only issue e-RUPI vouchers but cannot redeem them.
The entire linkage between the sponsors of services, partner banks, service providers and beneficiaries works as follows: the sponsoring agency will have to approach the partner banks with details of specific persons and the purpose for which payments to be made. After identifying a beneficiary using his/her mobile number and a voucher allocated by banks to the holder of that mobile number, the specified services will be delivered to that person only. It is also ensured that the payment will be made only after the delivery of the service is complete.
Unlike other existing digital payment systems such as Paytm and Paypal, e-RUPI is applicable for providing specific and targeted services. Using this payment platform, the government plans to provide drugs and nutritional support under Mother and Child Welfare Schemes, TB Eradication Programmes, drugs, and diagnostics under schemes like Ayushman Bharat, Pradhan Matri Jan Arogya Yojana, fertilizer subsidies, and more.  e-RUPI can also be used by the private and corporate sector to provide benefits to their employees under the employee welfare schemes and Corporate Social Responsibility Programme.  Enabling the application of social security schemes on the exact targeted beneficiaries, e-RUPI is expected to increase the effectiveness of welfare policies in India.
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