LIGHTWEIGHT AND PORTABLE PAYMENT SYSTEM

31st May, 2023 Economy

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Context

Reserve Bank of India is working on a lightweight and portable payment system, a "bunker equivalent in payment systems".

Details

The proposed Lightweight and Portable Payment System (LPSS) will be independent of conventional technologies and can be operated from anywhere by a bare minimum staff, according to the central bank.
It can be used for critical transactions during catastrophic events like natural calamities and war.

Need of the lightweight payment system

Existing conventional payment systems like RTGS (Real Time Gross Settlement), NEFT (National Electronic Funds Transfer) and UPI (Unified Payments Interface) are designed to handle large volumes while ensuring sustained availability. These systems are dependent on complex wired networks backed by advanced IT infrastructure.
However, catastrophic events like natural calamities and war have the potential to render these payment systems temporarily unavailable by disrupting the underlying information and communication infrastructure.
Therefore, it is prudent to be prepared to face such extreme and volatile situations.
Keeping this objective in mind, RBI has conceptualised the LPSS that will be independent of conventional technologies and can be operated from anywhere by a bare minimum staff.

Features of LPSS

It will operate on minimalistic hardware and software and would be made active only on a need basis.
The system can ensure near-zero downtime of the payment and settlement system in the country and keep the liquidity pipeline of the economy intact by facilitating uninterrupted functioning of essential payment services like bulk payments, interbank payments, and provision of cash to participant institutions.

Significance

LPSS would process transactions that are critical to ensure the stability of the economy such as government and market-related transactions.
Having such a resilient system is also likely to act as a bunker equivalent in payment systems and thereby enhance public confidence in digital payments and financial market infrastructure even during extreme conditions.

Trivia

Parameters	UPI	NEFT
Platform	A mobile app-based system that brings you multiple bank accounts on one platform for a unique effortless funds transfer experience	A process that is possible through mobile banking, internet banking and on-ground NEFT transactions
Transfer Time	Works on Immediate Payment Service; available 24×7	Can take up to 12 hours for fund transfer
Transfer cost	Currently free of cost; some banks may charge Rs.0.5 on every transaction	Currently free of cost via online platforms Rs. 2.50 < Rs. 10,000 Rs. 5.00 < Rs. 10,000 – Rs. 1 Lakh Rs. 15.00 < Rs. 1-2 Lakh Rs. 25.00 above Rs. 2 Lakh
Transfer initiation	Can be initiated from any bank’s UPI app	Must be initiated from the Sender/Remitter bank’s app
Transfer Type	Both payment and collection transactions are possible	Only payment transactions are possible
Per Transaction Limit	Daily limit: Rs. 1 Lakh	No upper or lower limits
Beneficiary Details	Requires only Virtual ID	Requires bank account no., IFSC code, etc.
Bank Account Requirement	UPI payment or collection of money is possible even if you do not have a bank account	NEFT is possible only if you have a bank account
Adding a beneficiary	No need of pre-addition/approval of beneficiary; transfer made to beneficiary’s virtual ID	Pre-addition and bank’s approval of beneficiary required before transfer