The Union Cabinet yesterday approved an incentive scheme to promote RuPay Debit Cards and low-value BHIM-UPI transactions. Under the scheme, the government will incentivize banks by paying a percentage of the value of transactions. The estimated financial outlay for a period of one year is Rs. 1,300 crores.
The scheme, effective from April 1st, 2021, will aim to promote these indigenous technologies to further boost digital payments in the country.
Aggressive Promotion of RuPay
India has long been promoting its indigenous RuPay card technology, as well as the UPI system. Not very happy with it, Visa has recently complained to the U.S. government against India’s favoritism for RuPay.
First launched in 2012, Rupay had an initial thrust from the government’s Jan Dhan Yojana. All accounts linked with the project issued RuPay cards to the beneficiaries. However, it won’t be wrong to suggest that RuPay also has its own advantage. For one, it charges lower commissions for transactions than its rivals, lowering the financial burden on banks.
Data Localisation Issues
Besides, RuPay also complies with the RBI’s data localization guidelines. These guidelines mandate companies to store data of transactions, purchases, orders, and customer information in a system ‘within India’. After compliance, companies must notify the RBI. Besides, they also have to send a Board-approved System Audit Report (SAR) performed by a CERT-In empaneled auditor.
The RBI has already imposed restrictions on Mastercard for violation of these rules. The company has not been able to onboard new domestic customers since July 22, 2021. Foreign entities claim that most of their processing is centralized. Hence, reorganizing worldwide operations and establishing a separate hub in India is not viable.
But this new scheme can be said to be the first of its kind, actively doling out an incentive for banks to promote RuPay.
You can read the full press release here.