Reserve Bank of India (RBI) Governor Shaktikanta Das on April 5, 2024 revealed plans to introduce a new Unified Payments Interface (UPI)-based cash deposit facility, in order to boost digital transactions and enhance customer convenience.
Traditionally, Unified Payments Interface (UPI) is being used for peer-to-peer (P2P) transactions, bill payments or peer-to-merchant (P2M) transactions. RBI feels that UPI should be extended to include cash deposits, too. The proposed system will enable users to deposit cash at Cash Deposit Machines (CDMs) using UPI, thus eliminating the need for an ATM or a debit card.
Das emphasised the widespread acceptance and benefits of UPI, adding that the successful integration for card-less cash withdrawals at ATMs should be extended to include cashless deposits as well.
Cash deposits using UPI will work similarly to card-less cash withdrawals at ATMs through use of UPI. “Given the popularity and acceptance of UPI, as also the benefits seen from the availability of UPI for card-less cash withdrawal at ATMs, it is now proposed to facilitate cash deposit facility through the use of UPI. Operational instructions will be issued shortly,” Das said.
“Deposit of cash through Cash Deposit Machines (CDMs) is primarily being done through the use of debit cards. Given the experience gained from card-less cash withdrawal using UPI at the ATMs, it is now proposed to also facilitate deposit of cash in CDMs using UPI. This measure will further enhance customer convenience and make the currency handling process at banks more efficient,” RBI said in a statement.
Developed by the National Payments Corporation of India (NPCI), UPI is a real-time payment system for instantaneous fund transfers between bank accounts through mobile platforms.
Payment To PPI Via Third Party Apps
RBI’s mission to boost digital payments extends beyond cash deposits via UPI. In another announcement, the central bank said it will expand UPI access by allowing payments for prepaid payment instruments (PPIs) through third-party apps.
At present, UPI payments from PPIs can be made only by using the Web or mobile app provided by the PPI issuer. It is now proposed to permit the use of third-party UPI apps for making UPI payments from PPI wallets. This will further enhance customer convenience and boost adoption of digital payments for small value transactions, RBI said.
Shivaji Thapliyal, head of research and lead analyst at Yes Securities says: “It is now proposed by the RBI to permit the use of third party UPI apps for making payments from PPI wallets. Hence, PPI wallet holders do not have to be completely dependent on the issuer of the PPI wallet. It would enhance customer convenience and boost adoption of digital payments for small value transactions.”
He adds: “At present, the wallet market had been thrown wide open due to the RBI diktat on Paytm Payments Bank. The above guideline, in a sense, serves to make PPI wallets somewhat inter-operable and democratises the wallet market to that extent. It may be noted that, in FY23, Paytm Wallet had a GMV of $19.1 billion, with Mobikwik being a distant second with $1 billion GMV. The RBI diktat had meant that the Paytm Wallet business would, effectively, close down. However, it would be interesting to see what scenarios could emerge if third party UPI apps, which would include Paytm, would be able to access other PPI wallets.”
Meanwhile RBI kept the repo rate unchanged at 6.50 per cent for the seventh consecutive time.
