The PIDF will also receive recurring contributions to cover operational expenses from the banks and card networks. The RBI will also contribute to yearly shortfalls, if necessary.
The Reserve Bank of India (RBI) on Friday announced the creation of a Rs 500-crore payments infrastructure development fund (PIDF) to encourage acquirers to deploy points of sale (PoS) infrastructure — both physical and digital modes — in tier-3 to tier-6 centres as also in northeastern states.
The central bank will chip in with an initial contribution of Rs 250 crore, it said in a statement, with the remaining contribution coming from card-issuing banks and card networks operating in the country. The PIDF will also receive recurring contributions to cover operational expenses from the banks and card networks. The RBI will also contribute to yearly shortfalls, if necessary.
“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 RBI said in the statement.
The PIDF will be governed through an advisory council and managed and administered by the RBI. The setting up of this fund is in line with the recommendations of the report of the committee on deepening of digital payments, chaired by Nandan Nilekani.
The report had made the case for an acceptance development fund which would help cover some of the costs associated with the payments business which, on a standalone basis, is a loss-making one for banks. For instance, one of the recommendations of the report was that the interchange on card payments be reduced by 15 basis points (bps), or 0.15%.
An additional 5 bps should be placed in an acceptance development fund by the issuer and the RBI could choose to match the contribution. “This will increase the incentive for acquirers to sign up merchants,” the report had said.