RBI’S NEW FRAMEWORK FOR OFFLINE DIGITAL PAYMENTS - Hardik Lohiya

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The Reserve Bank of India (RBI) issued a framework on Monday to permit small-value digital payments in offline mode via any channel or instrument, including cards, wallets, and mobile devices. Offline digital payment does not require internet or telecommunications connectivity. So, even if someone is in a rural region and does not have cash or internet connectivity, he can still use their mobile phone or wallet to buy something or make a transaction of up to Rs 200. This new framework aims to stimulate digital transactions in rural and semi-urban areas. It permits offline payments of up to Rs 200 per transaction, subject to a cumulative limit of Rs 2,000.

 How will the new payment system work?
 In the offline mode, payments can be done face-to-face via any channel or instrument such as wallets, cards, and mobile devices.

 The Reserve Bank of India noted that these transactions will not require an additional factor of authentication (AFA) and that because the transactions will take place offline, the consumer will be notified (by SMS and/or e-mail) after a time lag.

 What is the goal of the new initiative?
 According to the central bank, offline transactions are projected to boost digital transactions in places with poor or limited internet or phone connectivity, notably in semi-urban and rural areas.
  
 Overall limit and the framework
 Transactions are limited to Rs 200 per transaction and an aggregate limit of Rs 2,000 for all transactions till the account balance is refilled. Balance replenishment is only possible in online mode. Although it will undoubtedly increase the number of digital transactions, possibly the most significant barrier is that the limit can only be reset in the online mode with additional factor verification. So, if you don't have access to the internet for an extended period, this can be a pain.

 Also, the central bank mentioned that customers will continue to enjoy protection under the provisions of circulars limiting customer liability and will have recourse to the Reserve Bank's Integrated Ombudsman Scheme for grievance redress.

 In my opinion, this new framework introduced by the central bank will not only help to increase the adoption of digital transactions, more importantly, it could also help people who have a patchy or no internet connection, thereby increasing the reliability of these digital transactions. So, if you’re stuck in a hotel without network connectivity, this facility could come in extremely handy. The only thing which now needs to be observed is how this limit of Rs. 200 plays out in this framework, is it sufficient or will RBI have to increase it?

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