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Payments Infrastructure Development Fund (PIDF)

Topics Covered: Inclusive growth and issues arising from it.

Payments Infrastructure Development Fund (PIDF)

What to study?

For Prelims: Key features of the fund.

For Mains: Need for and Significance of the fund, challenges to digital infrastructure in India.

Context: In an effort to give a push to digital payments across the country, the Reserve Bank of India (RBI) is setting up a Payment Infrastructure Development Fund (PIDF) of Rs 500 crore.

All you need to know about the fund:

Objective: This fund has been created to encourage acquirers to deploy point of sale (PoS) infrastructure, both physical and digital, in tier-3 to tier-6 centres and north eastern states.

Contributions to the fund: The RBI has made an initial contribution of Rs 250 crore covering half the fund. The remaining will come from the card issuing banks and card networks operating in the country.

Management: The fund will be governed through an advisory council but it will be managed and administered by the RBI.

Need for and Significance:

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 fund is also in line with the measures proposed by the vision document on payment and settlement systems in India 2019-2021.

The enhanced ability of PoS infrastructure is supposed to reduce demand of cash over time. By 2021, there will be around 5 million active PoS by 2021.

Acceptance Development Fund:

In a similar move, last year, the RBI had also proposed to set up an Acceptance Development Fund which will be used to develop card acceptance infrastructure across small towns and cities.

The Fund will be used to ensure growth of card acceptance infrastructure such as swipe machines across the country particularly in Tier III and Tier VI cities.

InstaLinks:

Prelims Link:

  1. PIDF- contributions, management and objectives.
  2. RBI- governors and Deputy governors- tenure and appointment.
  3. What are POS devices?
  4. Who manages ATM network in India?
  5. What is opportunity cost?

Sources: the Hindu.