The Reserve Bank of India (RBI), often referred to as the Central Bank of India, has recently taken a stride towards promoting digital transactions by increasing the transaction limit for small-value offline digital payments from Rs 200 to Rs 500. This significant decision was unveiled as part of the bank’s bi-monthly policy review and aligns with the provisions stated in Section 10(2) and Section 18 of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007). The RBI’s announcement unequivocally states that this adjustment has been implemented with immediate effect.
Facilitating Rural Digital Transactions and Offline Payments: A Holistic Perspective
The RBI introduced the “Framework for Facilitating Small Value Digital Payments in Offline Mode” in January 2022, signaling its commitment to nurturing digital transactions in rural and semi-urban areas.
Offline digital payments denote transactions that operate independently of internet or telecom connectivity. These small-value offline digital payments can be carried out using the National Common Mobility Card (NCMC) and UPI Lite.
In the offline mode, these payments transpire in person and can be executed through diverse channels or instruments such as cards, digital wallets, and mobile devices. Significantly, they dispense with the need for an additional factor of authentication (AFA). Nevertheless, due to the offline nature of these transactions, customers are notified via SMS and/or email alerts after a certain time lag.
The proposition to amplify the transaction limit was initially put forth on August 10. The rationale behind this adjustment stemmed from the realization that numerous payments, like restaurant bills and ride-hailing fares, often surpass the previous cap of Rs 200. This limit had inadvertently curbed the broader utilization of the platform for common and frequent transactions.
The Evolution of RBI’s Digital Payment Approach: From Offline Mode Pilots to Nationwide Framework
RBI’s policy underlines that by dispensing with the requirement for two-factor authentication for small-value transactions, these channels facilitate expedited, reliable, and touchless payment mechanisms for everyday minor transactions, including transit payments.
In August 2020, the central bank floated the notion of a pilot scheme for small-value payments in offline mode. This scheme was embedded with protective features to safeguard user interests and extend liability protection. Subsequent to this proposition, pilot trials were conducted utilizing innovative technology that permitted retail digital payments even in scenarios marked by low or nonexistent internet connectivity (offline mode). These pilot trials were successfully carried out in various parts of the country from September 2020 to June 2021, encompassing a total of 2.41 lakh transactions in volume and Rs 1.16 crore in value.
Consequently, in October 2021, the RBI proposed the rollout of a comprehensive framework for executing retail digital payments in offline mode across the nation. This strategic move reflects the central bank’s unwavering commitment to harnessing technology to enhance the efficiency and accessibility of financial transactions, especially in regions where digital penetration is evolving.
