digital-payments-during-lockdown

Context: The latest report from RBI (Reserve Bank of India) shows a 46% contraction in Digital Transactions in April month as compared to March 2020.

Findings of Report:

  • The fall in transactions was between 26% and 71% across different payment channels.
    • However a rise of 138% in digital payments via APBS ( Aadhar payment bridge systems) was observed. 
  • RTGS (Real Time Gross Settlement) and NEFT (National Electronic Fund Transfer) combined account for a little over 90 per cent of total payments in the country however the former contracted by 46.5% and latter by 42.7%.
  • Cash withdrawals from ATMs through debit cards contracted by 49% to Rs 1.27 lakh crore from Rs 2.49 lakh crore in March month.
  • IMPS (immediate payment service) recorded a 40?ll in value while UPI (Unique payment interface) transactions too shrunk by 26.8%.

Analysing the findings:

  • The payment transactions fell as lockdown adversely impacted the economy, bringing numerous sectors to a standstill.
  • The fall in transactions is coterminous with  the fall in industrial output which contracted by 55.5 percent in April.
  • The fall occurred due to decreased cash demand during the lockdown as money was primarily needed for buying essentials and not for other purposes.
  • ABPS was the only mode of digital payment which expanded due enhanced government transfers under the Pradhan Mantri Garib Kalyan Yojana that was announced on March 26.

Different Modes of Digital Payment:

  • National Electronic Funds Transfer (NEFT) 
    • It is a payment system that facilitates electronic transfer of money from any bank branch to a person holding an account with any other bank branch.
    • Fund transfers through the NEFT system do not occur on a real-time basis and the fund transfer settles in 23 half-hourly batches.
    • No cap on maximum transaction value
  • Real Time Gross Settlement (RTGS) 
    • It is a payment system in which the money is credited in the beneficiary’s account in real time and on a gross basis. 
    • The RTGS system is primarily meant for large value transactions that require and receive immediate clearing.
    • No cap on maximum transaction value
  • Immediate Mobile Payment Services(IMPS) 
    • It is a real time instant inter-bank funds transfer system managed by National payment corporation of India. 
    • It is available 24/7 throughout the year including bank holidays unlike NEFT and RTGS.
    • Maximum transaction value can’t exceed 2 lakh rupees.
  • Unified Payments Interface
    • It is an instant real-time payment system developed by National Payments Corporation of India which facilitates inter-bank transactions. 
    • The interface is regulated by the Reserve Bank of India and works by instantly transferring funds between two bank accounts on a mobile platform.
  • Aadhaar Bridge Payment System
    • It is one of the unique payment systems implemented by NPCI.
    • It uses Aadhaar number as a central key for electronically channelizing the Government benefits and subsidies in the Aadhaar Enabled Bank Accounts (AEBA) of the intended beneficiaries.

 

PM Garib Kalyan Yojana:

  • During the COVID-19 pandemic in India, the Finance Minister announced a Rs. 1.70 Lakh Crore relief package in March 2020 under Pradhan Mantri Garib Kalyan Yojana for the poor.
  • Features
    • Rs. 500 each per month to 19.86 crore women Jan Dhan account holders
    • LPG cylinders to be provided for free to 8 crore poor families for the next three months.
    • Free 5 kg additional wheat/rice for all ration card holders for 3 months.
    • 1,000 per month for senior citizens,widows and disabled for next three months.

Source:

https://indianexpress.com/article/explained/india-digital-payments-covid-19-lockdown-6461360/