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Update: RBI releases framework for facilitating ‘Small Value Digital Payments’
Update: RBI releases framework for facilitating ‘Small Value Digital Payments’

January 10, 2022

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  1. Backdrop

The Reserve Bank of India (RBI), in August 2020, had announced a scheme to conduct pilot tests of innovative technology that would enable retail digital payments in situations and places with low or no internet connectivity i.e., enable offline digital payments. It was stated that the decision on formalising a system would be based on the experience of such scheme.

The backdrop of this announcement was that while there was a spurt in digital payments using mobile phones, cards, wallets amongst others, the lack of internet connectivity/ poor connectivity had been major impediment to digital payments. Offline digital payments were proposed as a solution to these impediments.

In November, 2019, the RBI announced opening of its first cohort under the Regulatory Sandbox (RS) with ‘Retail Payments’ as a theme. The theme was expected to “spur innovation in digital payments space and help in offering payment services to the unserved and underserved segment of the population.” Of these, one of the innovative products to be considered for inclusion in RS was “offline payment solutions”. Out of 32 applicants, 6 entities were selected for the RS.

The pilot testing was undertaken from September, 2020 to July, 2021. The first cohort exited in September, 2021, and the products were found viable within the boundary conditions defined during testing under the RS. With this feedback, it was announced in October, 2021 that a framework for small value digital payments in offline mode would be introduced by the RBI.

  1. Framework for facilitating small value digital payments in offline mode

The Framework for facilitating small value digital payments in offline mode (Framework) was issued under S. 10(2) read with S. 18 of Payment and Settlement Systems Act, 2007. The Authorised Payment System Operators (PSOs) and Payment System Participants (PSPs) – acquirers and issuers (banks and non-banks) – are to ensure compliance with the Framework.

The Framework defines “offline payments” as transactions which do not require internet or telecom connectivity to take effect.

The following are the requirements which shall have to be complied with to enable 0ffline small payments:

  1. Offline payments may be made using any channel or instrument like cards, wallets, mobile devices, etc.
  2. Offline payments shall be made in proximity (face to face) mode only.
  3. Offline payment transactions may be offered without Additional Factor of Authentication (AFA).
  4. Payment instruments shall be enabled for offline transactions based on explicit consent of the customer. Such transactions using cards shall be allowed without a requirement to switch on the contactless transaction channel, in relaxation of terms of DPSS circular no. DPSS.CO.PD no.1343/02.14.003/2019-20 dated January 15, 2020 on Enhancing Security of Card Transactions.
  5. The upper limit of an offline payment transaction shall be ₹200. The total limit for offline transactions on a payment instrument shall be ₹2,000 at any point in time. Replenishment of used limit shall be allowed only in online mode with AFA.
  6. The issuer shall send transaction alerts to users as soon as transaction details are received. There is no compulsion to send alert for each transaction; however, details of each transaction shall be adequately conveyed.
  7. The acquirer shall incur all liabilities arising out of technical or transaction security issues at merchant’s end.
  8. Offline payments shall be covered under the provisions of RBI’s limited customer liability circulars[1].
  9. The customers shall have recourse to the Reserve Bank – Integrated Ombudsman Scheme, as applicable, for grievance redressal.
  10. Reserve Bank retains the right to stop or modify the operations of any such payment solution that enables small value digital payments in offline mode.

For more information, kindly write to apurva@nasscom.in.


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Apurva Singh
Senior Policy Associate

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