The Reserve Bank of India (RBI) has conceptualised a lightweight and portable payment system called Lightweight Payment and Settlement System (LPSS), which will be independent of conventional technologies used for existing payment systems such as RTGS, NEFT, and UPI, and can be operated from anywhere by a bare minimum staff.
The central bank, in its annual report for the year 2022-23, said the existing conventional payment systems like the RTGS, NEFT, and UPI are designed to handle large volumes while ensuring sustained availability and hence they are dependent on complex wired networks backed by the 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," says the report, adding it's prudent to be prepared to face such extreme and volatile situations.
The LPSS, it says, would operate on minimalistic hardware and software, and would be made active only on a need basis. "It would process transactions that are critical to ensure the stability of the economy such as government and market-related transactions," the central bank adds.
This lightweight and portable payment system could ensure near-zero downtime of payment and settlement system in the country, and keep the liquidity pipeline of the economy alive and intact by facilitating uninterrupted functioning of essential payment services like bulk payments, interbank payments, and provision of cash to participant institutions, the central bank says. "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."
In its agenda for 2023-24, the RBI has said it has put in place a "resilient framework for structured oversight of centralised payment systems Utkarsh 2.0". The Reserve Bank has completed the internal assessment of the centralised payment systems, i.e., NEFT and RTGS, in compliance with the Principles for Financial Market Infrastructures (PFMI) standards. Based on the learnings from the assessment, a resilient framework prescribing the standards, frequency, disclosures, etc. for the oversight of centralised payment systems will be formulated.
The Reserve Bank extended its efforts towards enhancing the efficiency of the payments ecosystem, along with targeted initiatives focused on customer centricity, cyber security, and digital deepening.
The ‘Payments Vision 2025’ document was released during the year to strengthen payment systems by leveraging on the initiatives undertaken during the last vision period (2019-21). The central bank said it stayed focused to ensure round-the-clock availability of Information and Communication Technology infrastructure for the smooth functioning of its IT systems and applications.
“Efficient payment and settlement systems foster economic development, promote financial stability and support financial inclusion,” the RBI says.