Payment Infrastructure Development Fund (PIDF) scheme

Recently, the Reserve Bank of India declared the functioning of the Payment Infrastructure Development Fund (PIDF) scheme.

Key features of the scheme:

RBI prescribed details of contribution to the fund and sought to incentivize the usage of payment devices.

Aim:

The PIDF scheme is meant to subsidize the deployment of payment acceptance infrastructure in tier-3 to tier-6 centers, with a special specialization in the northeastern states of the country.

Management of the fund:

An advisory assembly (AA) in the chairmanship of RBI second-in-command director BP Kanungo has been complete for the organization of the PIDF.

Duration of the fund:

PIDF is going to be operational for 3 years effective from January 1, 2021, and should be extended for 2 more years

Current status:

The PIDF presently features a corpus of Rs 345 crore, with Rs 250 crore contributed by the RBI and Rs 95 crore by the main authorized card networks within the country.

Contribution to the corpus

• RBI has stated that the authorized card networks shall contribute altogether Rs 100 crore.
• The card-issuing banks shall also contribute to the corpus supported the cardboard issuance volume covering both debit and credit card at the speed of '1 and '3 per debit and credit card issued by them, respectively.
• It also mentioned that any new entrant to the cardboard payment ecosystem shall contribute an appropriate amount to the PIDF.

 The PIDF will be receiving the annual contributions from the card networks and 

• banks that are issuing cards. Card networks will need to contribute with one basis point (bps), or 0.01 paisa per rupee of transaction.
• Card issuing banks will need to contribute one bps and two bps 0.01 paisa and 0.02 paisa per rupee of transaction for debit and credit cards respectively.
• They must also contribute Rupee 1 and Rs 3 for each new debit and credit card issued by them during the year.
• The RBI shall donate to annual deficits if any.

Parameters for utilization of funds:

• RBI in its notification has said that the main target shall be to focus on those merchants who are yet to be terminalized (merchants who don't have any payment acceptance device).
• Merchants engaged in services like transport and hospitality, government payments, fuel pumps, public distribution system (PDS) shops, healthcare, and Kirana shops could also be included, especially within the targeted geographies.
• The AC shall devise a transparent mechanism for the allocation of targets to acquiring banks and non-banks in several segments and locations.

Allocation of funds:

• Tentatively, tier-3 and tier-4 centers are going to be allocated 30% of the acceptance devices, tier-5 and tier-6 centers will get 60% and therefore the north-eastern states are going to be given 10%.
• Multiple payment acceptance devices and infrastructure supporting underlying card payments, like physical PoS, mPoS, GPRS, public switched telephone network (PSTN) and QR code-based payments are going to be funded under the scheme.

 Subsidy:

• As per the RBI notification, because the cost structure of acceptance devices varies, subsidy amounts shall accordingly differ by the sort of payment acceptance device deployed.
• Funding of 30% to 50% of the cost of bodily PoS and 50% to 75% funding for Numerical PoS shall be obtainable.
• Payment methods that aren't interoperable shall not be considered under the PIDF.
• The subsidy shall not be claimed by applicants from other sources just like the commercial bank for Agriculture and Rural Development (NABARD), etc.
• In case other mechanisms exist for providing subsidies or reimbursing the cost of deployment of acceptance infrastructure, no reimbursement shall be claimed from PIDF.
• The funding shall be decided on a half-yearly foundation, after safeguarding that presentation limits are achieved, including circumstances for ‘active’ status of the receipt expedient and ‘least usage’ standards, as definite by the AC.
• The minimum usage shall be termed as 50 transactions over 90 days and active status shall be minimum usage for 10 days over the 90 days.
• The funding rights shall be treated on a half-yearly foundation and 75% of the funding quantity shall be unconfined.
• The balance of 25% shall be released later subject to the status of the device being active in three out of the four quarters of the following year.
• The arrangement is on a repayment basis; therefore, the entitlement shall be succumbed only after creation imbursement to the vendor.
• The maximum cost of physical acceptance devices eligible for the subsidy is going to be Rs 10,000, including one-time operating costs up to Rs 500.
• The maximum cost of digital acceptance devices eligible for subsidy is going to be Rs 300, including a one-time operating expense of up to Rs 200.

Who will monitor the implementation targets?

It shall be monitored by the RBI with assistance from card networks, the Indian Banks’ Association (IBA), and therefore the Payments Council of India (PCI).

Incentives:

Acquirers shall succumb quarterly intelligences on the attainment of boards to the RBI.

Acquirers meeting or exceeding their targets well in time and/or ensuring greater utilization of acceptance devices in terms of transactions shall be incentivized.

Those who don't achieve their targets shall be disincentivized, by scaling up or down the extent of reimbursement of subsidy.

Footnotes 

https://m.rbi.org.in

https://www.journalsofindia.com

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or  Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related  Laws Being Force In India, For The Time Being. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, White Code Consulting & Governance shall not be responsible for any errors caused due to human error or otherwise.