The Reserve Bank of India (RBI) recently declared the operationalisation of the Payment Infrastructure Development Fund (PIDF) scheme. This has been launched with the objective to develop payment acceptance infrastructure predominantly in tier-3 to tier-6 cities, with a particular emphasis on benefiting the north-eastern states of India.
Timeline for the PIDF Scheme
The PIDF will be operational over a three-year period, starting from 1st January, 2021. There is a possibility for the fund’s duration to be extended by an additional two years, if necessary.
Management of the PIDF
The scheme will be managed by an Advisory Council (AC), which is helmed by RBI deputy governor BP Kanungo. The AC is responsible for overseeing the operational aspects of the fund.
Fund Allocation Details
The PIDF currently holds a corpus of Rs. 345 crore. Out of this, Rs. 250 crore was contributed by the RBI, and Rs. 95 crore was provided by several major authorised card networks active in the country. These card networks are expected to contribute up to Rs. 100 crore in total. Additional annual contributions will also be received from both card networks and card-issuing banks.
Role of Card Networks and Implementation of the Fund
Card networks, such as Mastercard and Visa, help facilitate transactions between merchants and card issuers. They will contribute 0.01 paisa per rupee of transaction to the PIDF. The scheme aims to support those merchants who do not currently possess any payment acceptance device. Several sectors have been identified for specific focus; these include transport, hospitality, government payments, fuel pumps, public distribution system (PDS) shops, healthcare and kirana shops.
Target Allocation and Monitoring
The PIDF will be utilized to provide funding subsidies to banks and non-banking entities for the purpose of deploying payment infrastructure. These subsidies will be granted, contingent upon specific targets being met. Broadly, tier-3 and tier-4 centres will receive 30% of the acceptance devices, tier-5 and tier-6 centres will get 60%, and the north-eastern states will be allocated 10%.
Types of Supported Payment Devices
A variety of payment acceptance devices and infrastructure supporting card payments will be funded under the PIDF scheme. Examples include physical Point of Sale, mobile Point of Sale, General Packet Radio Service (GPRS), Public Switched Telephone Network (PSTN) and QR code-based payment systems.
Breakdown of Subsidies
Subsidies of between 30% and 50% of the cost of physical PoS and 50% to 75% subsidy for Digital PoS will be offered under the program. However, these subsidies will be granted half-yearly, and only after ensuring that certain performance parameters have been achieved.
Ensuring Accountability
The entities receiving the subsidy, referred to as ‘acquirers’, are required to submit quarterly reports to the RBI. These reports should detail the degree to which established targets have been met.
Additional Initiatives
The establishment of PIDF aligns with the strategic actions proposed by the vision document on payment and settlement systems in India 2019-2021. In addition to this, the RBI has constructed a composite Digital Payments Index (DPI) in order to track the degree of digitisation of payments throughout the nation.