e-rupi

On the 2nd of August, 2021, the Govt of India launched “e-rupi” - a digital payment method to enable “leak-proof” transfer of benefits

But what is e-rupi?

e-rupi is an e-voucher developed by the National Payments Corporation of India (NPCI)- an umbrella organisation for operating retail payments and settlement systems in India. It is something akin to the e-vouchers provided by e-commerce companies like Amazon, Flipkart and such.

An e-voucher is basically a prepaid sum of money that you can redeem and use to make your purchases.

Similarly, “e-rupi” is a voucher that will be delivered to the beneficiaries in the form of a QR code and SMS string-based voucher through which the funds or the benefits will be directly transferred to the consigned accounts

But what is the need for e-rupi?

Short answer:

To make public distribution system more efficient

Long answer:

The Govt of India runs various welfare and social upliftment schemes. The schemes are aimed at meeting the basic needs and necessities of the general population and the less privileged. Take for example the distribution of subsidized rice, dal or kerosene from the govt stores. The govt has a system in place to manage this distribution of basic amenities which are termed as Public Distribution System or PDS in short

However, the PDS has several loopholes that the middleman can use to cheat the beneficiary and the govt and pocket the benefits. A while ago, it was common in India for the middleman to forge fake ration cards or use the ration cards of the deceased to show an inflated list of distribution. And the govt had no real system in place to check this duplicity. In fact, the Govt. of India still keeps losing crores of rupees each year offering subsidies to people, who in some cases don't even exist while an estimated 60% of the target beneficiaries still suffer unhelped

To tackle this issue, in 2014, the newly elected Government introduced ‘Jan Dhan Yojana’ - an initiative to open bank accounts to all its citizens through aadhaar. The idea was to directly transfer the benefits into the beneficiary accounts.

While a game-changer, the initiative had a limited reach. An estimated 190 million citizens of India still don't have a bank account. Even if the bank accounts were opened for them, handling and accessing the bank accounts would still be a bitter experience for them.

This is because, in general, the awareness of banking literature and operation in India is limited and add to it the poor banking infrastructure and bad performance of the nationalized banks due to heavy bad debts (Remember the Punjab National Bank or Yes Bank). It is safe to say that the collective consensus of using a bank for financial transactions is not so well received

And this is where “e-rupi” comes into the picture

It enables the transfer of benefits without the need to approach middlemen, banks or any digital payments partner

Any government agency or a corporation can generate e-RUPI vouchers via their partner banks which will be sent to the beneficiary via SMS, mail or any other digital means possible.

To avail the benefits(let's assume subsidized buying of rice), the beneficiary will be required to show the QR code or the SMS message to the merchant, who will scan the same and a verification code will be sent to the beneficiary’s phone number. The beneficiary will be then required to share the verification code with the merchant to confirm the transaction.

Further, these e-vouchers are person or purpose-specific which means they can only be availed for the purpose they were created for. For instance, if a voucher was created for LPG cylinder subsidy, it can be only redeemed for that purpose alone and not for redeeming rice or dal subsidy.

E-rupi at its conceptual phase looks very promising, it not only ensures that the target populace is benefitted without any complicated procedure but is also flexible to be implemented for other schemes or programs like healthcare or education.

But it still has few challenges that need to be answered. The govt in its press statement had mentioned that the beneficiaries are not required to disclose their identity. This is to keep the beneficiary information completely confidential. While this is a welcome move, it also allows room for anyone to claim the benefits on behalf of the beneficiary. All they have to do is copy the message or the QR from the beneficiary and present it to the merchant and avail the benefits

How does the Govt intend to tackle this issue remains to be seen!