RBI Announces UPI For Feature Phones & On-Device Wallets For Payments

The Governor of Reserve Bank of India (RBI), Shaktikanta Das, announced a proposal to launch the Unified Payment Interface (UPI) for feature phones, as well as an 'on-device' wallet for the payment system as part of his bimonthly monetary policy statement.

A regulatory and developmental policy statement issued by the RBI after Das' speech highlights that there are 113 crore mobile phone users in the country with only 74 crore smartphone users, indicating a significant number of feature phone users. UPI for feature phone is a step to cater to this section. Feature phone are bare basic mobile devices, that usually have little to no access to the internet, and to apps offered by mainstream platforms like the Android Play Store or the iOS App Store.

Further, UPI transaction shows that half of the transactions done through UPI were below ₹200. While this shows the success of the platform in low-ticket transactions, it also pressures payment system resources and leads to payment failure, according to the statement. It also says that these on-device wallets are poised to conserve the resource of banks with no changes to the transaction experience of users.

The guidelines and modalities of these featured will be issued separately.

Das also said said that the UPI limit was being increased from ₹2 lakh to ₹5 lakh towards payments made for initial public offerings (IPOs) and for government securities (G-Secs) through RBI's Retail Direct portal.

The charges incurred by various payment systems like credit cards, debit cards, UPI and payment instruments like wallets would also be revisited through a discussion paper so as to make them more affordable.

Also Read: RBI Retail Direct G-Sec Scheme: How You Can Invest In Govt Securities

Policy announcements

Das also announced that the central bank was keeping key policy rates unchanged, as concerns around the omicron variant grow in India and around the world.

The policy repo rate, also called the repurchase rate, stays unchanged at 4%.It is the rate at which the RBI lends to banks on a short-term basis. The reverse repo rate, or the rate at which banks keep their funds with the RBI on a short-term basis, remains at 3.35% The Marginal Standing Facility and the bank rate stay unchanged at 4.25%. With a vote of 5-1, the Monetary Policy Committee voted to keep the monetary policy stance as 'accommodative'.

Previously, the RBI has indicated that it would gradually draw out and stabilise the excess liquidity that was injected into India's financial system to counter the ongoing COVID-19 pandemic. A reverse repo rate hike would be a step to that end, as banks would be inclined to keep their park more of their funds with the RBI. This time, Das announced that liquidity would be reduced through auctions in a non-disruptive manner starting January 2022.

There was also an announcement for the overseas branches of banks. Initially, to repatriate their profits from their overseas branches, banks registered in India had to seek the RBI's approval. This permission is being done away with as long as the bank meets regulatory capital requirements.

Growth and inflation

The RBI has maintained that the Indian economy will grow 9.5% in the current financial year. In the third quarter (October to December 2021), a growth of 6.6% is expected, while 6% is expected in the fourth quarter (January to March 2022).

The economy grew 20.1% in the first quarter, and 8.4% in the second quarter of the ongoing financial year. In the first half of the financial year, growth was at 13.7%.

Inflation, measured by the consumer price index - or the rise in prices in a basket of goods and services typically used by households - is expected to be 5.3% for the financial year.

Also Read: Indian Economy Grows At 8.4% In Q2 FY22 As Economic Recovery Continues