Page 11 - Banking Finance July 2020

RBI CORNER

Mehta, NPCI CEO Dilip Asbe, CC Av- Another challenge is to increase RBI prescribes reforms list
enues CEO Vishwas Patel, Director of awareness among rural merchants
the Institute for Development and and customers where the use of QR for post-COVID recovery
Research in Banking Technology DRBT stickers is fast catching up for accept- RBI has prescribed several reforms to
A S Ramasastri, and Arvind Kumar, sci- ing digital payments, while maintain- get the economy back on the rails af-
entist at the Ministry of Electronics and ing social distancing norms, said a se- ter the rollback of various stimulus
measures taken to counter the
Information Technology (MeitY), are its nior executive at a payment company,
other members. who confirmed the development. lockdown-induced economic damage.
These include a concrete plan to rein
"There are concerns in the ecosystem, "Moreover, the process of deployment in fiscal deficit instead of kicking the
flagged at RBI, that some companies is not efficient as well; a single mer- can down the road, targeted tax sops
are using their own closed-loop system chant point is targeted by multiple to create employment, and sale of as-
for payment processing, which is payment companies creating needless sets to improve liquidity.
against the spirit of innovation and complexities for customers and mer- Behavioural changes would make re-
broader ecosystem expansion," said a chants," the person said. covery bumpy, and the texture of re-
banker aware of the matter who did covery would be different from the one
not want to be identified. RBI did not print Rs 2,000 that followed the 2008 global financial

The committee is in final stages of sub- note in 2019-20 crisis, the RBI said in its FY20 annual
mitting its report, the person added. report. "A credible consolidation plan,
RBI currency note press did not print specifying actionable for the reduction
A closed-loop QR system only accepts even single Rs 2,000 note in 2019-20.
payments from the mobile application RBI did not give any order for printing of debt and deficit levels will earn con-
fidence and acceptability, rather than
of its deployer. This is against the prin- Rs.2000 notes. The trend seems to be just extending the path of touch-
ciple of interoperability agreement in keeping with a conscious decision to down," it said. "It is worthwhile to
between third-party payment applica- bring down the share of Rs 2,000 notes consider an evaluation of the experi-
tions and banks that governs the Uni- in total currency under circulation, ence with GST by an independent com-
fied Payment Interface (UPI) ecosys- which has come down from at least mittee which can draw on the lessons.
tem. 50% in 2016-17 to just 22% in 2019-20. Fiscal incentives for industry can be
Furthermore, payment companies and RBI has also disposed a disproportion- realigned in favour of productive
banks are now also using QR technol- ate share of Rs 2,000 notes in the labour-intensive companies so as to
ogy for the acceptance of contactless soiled category. This raises questions generate employment."
card payments using Bharat QR, which about the government's plan for the Reform or Retreat The central bank,
is a mutually derived solution among country's highest denomination cur- which has been a part of almost all the
NPCI, Visa and Mastercard to pay bills rency note. In January 2019, the gov- easing measures, is warning that the
without sharing credentials to mer- ernment indicated that the printing of economic structure may have changed
chants. Rs 2,000 notes was being stopped as for the worse due to the pandemic as
The increased impetus among ecosys- there was adequate supply. the crisis spread beyond the financial
tem players to rely on cheaper QR "Printing of bank notes of particular system, unlike the global financial crisis
technology to accept contactless trans- denomination is decided by the govern- (GFC). "The GFC was essentially a finan-
actions comes at a time when the gov- ment in consultation with RBI to main- cial meltdown whereas the pandemic is
ernment is gradually easing lockdown tain the desired denomination mix for a health crisis, which has deleterious
restrictions in phases across the coun- facilitating transactional demand of ramifications across real and financial
sectors," the RBI said. "As stimulus is
try. public. No indent was placed with the unwound in a calibrated and non-disrup-
The option of providing contactless presses for printing of Rs 2,000 de- tive manner in a post-pandemic sce-
payment facilities for consumers could nomination notes for 2019-20.How- nario, deep-seated and wide-ranging
also be made mandatory for several ever, there is no decision to discontinue structural reforms in factor and product
categories of merchants, which could the printing of Rs 2,000 bank notes," markets, the financial sector, legal ar-
further necessitate a standardised pro- minister of state for finance Anurag chitecture, and in international com-
tocol for companies deploying these Singh Thakur told the LokSabha on petitiveness would be needed to regain
stickers, experts said. March 16, 2020. potential output losses." T

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