The Reserve Bank of India (“RBI”), through a press release dated August 6, 2020, issued a statement on developmental and regulatory policy. This policy sets out various measures to enhance liquidity support for financial markets and other stakeholders and ease financial stress caused due to the COVID-19 pandemic while strengthening credit discipline. Among others, the policy seeks to also deepen digital payments. In respect of payment settlement systems, the RBI has proposed to allow a pilot scheme for small value payments in offline mode with built-in features for safeguarding interest of users, liability protection, etc.
In furtherance of this policy, the RBI, on August 6, 2020, notified the pilot scheme for offline retail payments. In the last few years, the RBI has made efforts to prioritize security measures for digital payments, which have increased consumer confidence and safety leading to increased adoption in digital payments systems. The RBI has now identified erratic internet connectivity as one of the major impediments for adoption of digital payments. To encourage technological innovations that enable offline digital transactions, the RBI has permitted a pilot scheme to be conducted until March 31, 2021. Under the pilot scheme, authorised Payment System Operators (“PSOs”) – banks and non-banks – will be able to provide offline payment solutions using cards, wallets or mobile devices for remote or proximity payments subject to certain conditions detailed below. Other entities having innovative solutions shall tie-up with the authorised PSOs.
The pilot scheme has been issued under Section 10(2) read with Section 18 of the Payment and Settlement Systems Act, 2007.
The payment solutions provided to users for facilitating offline transactions shall be subject to the following key terms and conditions:
The RBI has invited entities other than PSOs that might have innovative solutions/products for offline transactions to tie-up with PSOs to offer their products. RBI retains the right to advice any PSO to exit the pilot scheme if it does not comply with the above conditions.
This update has been contributed by Suchita Ambadipudi (Partner) and Sheetal Srikanth (Associate).
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