Showing posts with label RBI. Show all posts
Showing posts with label RBI. Show all posts

Monday, July 11, 2016

RuPay credit card launch delayed further

RuPay credit card launch delayed further
RuPay, the domestic card payment service provider which was set to launch its credit card in June this year, has delayed the launch of its product. The earlier timeline for the launch was January, which was later pushed to June. However, now the National Payments Corporation of India (NPCI) has decided to shift the launch date even further.

“RuPay credit card was going to be launched in June 2016 but the launch has been further put off. The board approved date for the launch on August 28 but I think that will be a challenge. But, we will definitely launch the credit card in 2016,” said A P Hota, managing director and chief executive officer, NPCI.

Hota explained that the delay in launch is because NPCI is now working on a higher capacity financial technology infrastructure, which is taking time. “Currently, we have a switching system from Euronet. This has a capacity of 40 million transactions a day. However, the peak volume that we have processed is 14 million. But to be on a safe side, we have started work on a 100-million transaction capacity owned by FIS,” added Hota. The management believes it might take two-three years to reach the 100-million volume capacity mark.

Going ahead, within the credit card segment, NPCI will mainly be focusing on the top end segment, which is the gold or the platinum cards as they believe growth is likely to come from the higher-end variants.

RuPay is a domestic brand in the card space and is owned and developed by NPCI, and aims to compete with Visa and MasterCard that have a strong foothold in the segment. In the past year, RuPay has gained prominence as all the accounts started under the Pradhan Mantri Jan Dhan Yojana scheme have been given a RuPay card. According to the latest data, 219.3 million accounts have so far been opened and 180.1 million cards have been issued under this scheme.

Monday, October 12, 2015

Paytm to launch virtual 16 digit Rupay card

In a bid to increase the currency of its digital money, leading payments and company Paytm is planning to launch a virtual card in partnership with and a bunch of national banks. The virtual card, which will have a 16-digit number, just like a physical debit or credit card, will expand Paytm's reach significantly from 35,000 merchants currently using its to 1.5 million merchants, who accept all kinds of through plastic cards.

Once rolled out, the virtual card is expected to increase the utility of money stored on Paytm digital wallets, since it will make it usable across a much wider network, said Vijay Shekhar Sharma, “We are building this so that our wallet gets ubiquitously accepted across places.”

  • Paytm plans to launch a virtual card with RuPay
  • The card which will have a 16-digit number, just like a debit or credit card
  • It is expected to expand Paytm's reach from 35,000 merchants to 1.5 million
  • Paytm has applied for a payment bank licence. is expected to announce successful applicants by August

For instance, Taxi firm uses Paytm, but some of its peers don't. Similarly, leading e-commerce that may be competing with Paytm in the e-commerce space also do not use Paytm. However, after this virtual card is rolled out, consumers can shop from rival e-commerce sites or book a cab from aggregators other than Uber using their Paytm money. The virtual card will also give Paytm a leg up over its competitors which are offering similar services.

Sharma said the company is currently negotiating the commercials with banks and Rupay, and should be able to launch the product in the next three months. When asked why consumers will opt for a virtual pre-paid card when they can just shop using their debit or credit card, Sharma listed a couple of reasons. Using the debit card might put the entire bank account at the risk of cyber crime and very few people in the country have credit cards. There are only 20 million credit card users, compared to 81 million Paytm users, added Sharma. “Also, our goal is to provide online experience to even consumers who do not have a bank account.”

However, the company might face some challenges as Rupay is not currently offered by each and every bank in India and users might find the procedure too complicated. Once rolled out, a Paytm consumer will be able to see the 16-digit number in the application settings. The company is also exploring the option of issuing a physical card, which can be used at offline retail merchants.

Since Paytm has also applied for a Payment Bank license with the Reserve Bank of India (RBI), it will be interesting to note how these new payment models pan out for the company. In a recent interview to Business Standard, Sharma had said, “Payment will be our primary play. We came into business to solve the payment issues of this country and I am confident we can solve those by using the mobile platform. RBI is expected to come out with the first list on August 1. If we get a licence, we can offer a bouquet of financial services.”

At present, Paytm has a user base of 80 million and 30 million for its mobile wallet service. The number includes users accessing its services through computers. Sharma expects to see 50 million Paytm app downloads and a wallet user base of 200 million by the end of 2015-16.

The company is backed by Chinese e-commerce giant Alibaba's financial arm Ant Financial. It is set to get close to one million merchants from China on its marketplace and add about 100 million stock-keeping units (SKUs) to its platform by July-August as part of the deal. It will also increase the number of Indian merchants from 40,000 at present to 100,000 by the end of this financial year.

Monday, December 29, 2014

RuPay debit cards could be the Jan Dhan Yojana’s undoing

The lack of formal banking and cash is one of the toughest constraints in the rural areas of India. The Jan Dhan Yojana might be the best strategy to overcome this. But this ambitious scheme has one critical flaw that could ruin it and result in its failure to deliver on promises: the RuPay debit card. To ensure the success of the yojana, it is essential that the RuPay debit card plan be shelved, because it poses a huge reputation risk — the failure of the card could have damaging consequences for the scheme as a whole.

For families which have been offered bank accounts under the scheme, the advantages of a cash-based economy are just a step away. Except in the case of the lowest deciles, poor families do have some assets but, in the absence of a ready market for them, they are forced to make distress sales for even routine transactions. Having cash in the bank and, more importantly, a way to easily deposit and withdraw money, will be a force-changer for these families once the banking habit spreads.

The weakness in the system comes from the introduction of the debit card. It introduces the risk of a third party meddling with the savings bank deposits of crores of first-time account users. Earlier government programmes have become non-starters for similar reasons. But before going into this in detail, just imagine the landscape the debit card would create for new bank account holders. Recollect the tense times we went through when we first got cards — debit or credit. Recollect those tentative moments eons ago, when we operated an ATM machine for the first time.

In lakhs of villages across India, instead of offering frugal banking, we are trying to replicate these experiences. The debit card has to be preserved, kept reasonably dust free and intact for its magnetic strip to operate. Though the account won’t be frozen if the card is not used, the accident insurance cover gets cancelled if it is inactive for 45 days.

But this isn’t the chief obstacle. Repeated observations of auditors and independent studies about previous government schemes throw up two concerns. First, there is always one stage or point at which the beneficiary has to approach the district administration or the bank to get into the scheme. This is the point at which money could leak out of the scheme. The second concern is complication. The RBI list of frequently asked questions on the Jan Dhan Yojana, sent to all banks, acknowledges this — the “branch manager will have to advise all the related risks to the illiterate account-holder at the time of issuance of RuPay card”. The RuPay debit card is in line to be the leakage point from the scheme. It has the weakness of being complex and requiring a third party to administer.

The results could be devastating. Remember, for instance, in the Integrated Rural Development Programme, the loan scheme had two components: a subsidy provided by the government and a loan given by the bank. People may recall the standing instructions issued by bank headquarters to hand over the subsidy to the district or zila parishad representative but not to disburse the loan. The recipient got some money, the officials took a cut, and there was no pressure to repay a loan.

The Jan Dhan overdraft could meet the same fate, of being parcelled out, with the account holder getting the smallest share. To reduce the hassle and risk of keeping the card with themselves, a sizeable percentage of people, typically the weakest, might give it to someone else for safekeeping — a village leader or the bank manager. This is a real risk. The account holder knows if she does not put more money in the bank, she is safe from further loss, so, she will keep her account dry. Yet the safekeepers could purloin the account holder’s share of government subsidy.

The RuPay debit card’s problem is that it is a physical object and, like any government property, lends itself to widespread misuse. A far better option would have been a frugal banking plan based solely on a single-number platform like Aadhaar, with biometric identification, or a telecom number-based identification platform like M-Pesa for the Jan Dhan account holders to remember and use. Every benefit could have been credited to this account.

The debit card adds nothing to the experience of operating a bank account for the new entrant but has all the elements necessary to wreck it.

Monday, December 22, 2014

Account balance a necessity for Jan Dhan: SS Mundra

Jan Dhan yojana: No fresh a/c needed to get benefits of scheme 


RBI deputy governor SS Mundra defends the scheme as a great start and says the government's direct benefit transfers will see more accounts getting used.

Banks have surpassed the Jan Dhan target of 7.5 crore accounts amid current tally standing at 9 crore new accounts. However, frantic target chasing has meant probably 30 percent of accounts are for already banked customers. Effectively, only 40 percent are operational with some money in the account, making no sense giving mandatory RuPay cards.

RBI deputy governor SS Mundra defends the scheme as a great start and says the government's direct benefit transfers will see more accounts getting used. Mundra says, “There was an operational lag initially between opening accounts and issuing of RuPay cards, but that takes time. Of late, gap has narrowed but the necessary ingredient is balance in the accounts.”

In the race to reach their targets, banks have opened accounts for some who already have accounts. Sometimes customers have beguiled bankers hoping to claim the insurance benefits that come with the new account.

“Yes, there were cases where people believed only new account would give entitlement to benefits. I can't give exact no of duplicate accounts but some surveys done show 30 percent duplicity. Disregarding the same, residual figure is still near original target”, he adds.

While duplicate accounts are not illegal, the bigger problem is that new accounts make sense only if some money is saved or spent. Mundra, like many bankers maintains that any serious usage of the new accounts will only take effect when government’s transfer benefits like food and fertiliser subsidy pass through them.

Mundra took over as Deputy Governor of the Reserve Bank of India, in charge of banking supervision and financial inclusion at a time when the new government had just lifted financial inclusion to mission mode with its Jan Dhan Yojana.

Inclusion has always been the central bank’s stated goal and an area of expertise for Mundra. He was the chairman of the committee on financial inclusion set up by the Indian Banks Association as also of the Nachiket Mor Committee on Comprehensive Financial Services for Small business and low income households.

As former chairman of Bank of Baroda and a career banker for 37 years, Mundra is also best endowed for supervising banks as a regulator at a time when loan defaults are running high.

Below is verbatim transcript of the interview:

Q: Jan Dhan is now almost six months old. Are we getting very close to the targets?

A: If we are talking in terms of figures then targets are already behind. If you recollect when Jan Dhan had started it had aimed at opening 7.5 crore or 75 million accounts. The last tally is almost 9 crore, so 90 million accounts have already open. So in terms of number of accounts to be opened certainly that milestone has been reached.

Jan Dhan was not only about opening the account and that is where the Reserve bank had been expressing all those things that opening of account is just the first step. It is very crucial that the accounts are operational and they bring certain desirable outcomes and larger outcome would be to inculcate a saving and investment habit in the people who are coming to the formal banking sector for the first time. But there is no denying the fact that for doing all that you have to have an account and that has been done.

Now it is also crucial to do some more steps. So the linking of this account with Aadhaar, the DBT should start flowing, the people themselves would start saving, but I am happy to see, when I look at the latest figure and I understand that now these accounts, though more than 60 percent of them are still not operational, but the account that are operational have already accumulated a saving of around Rs 7,000 crore, as per the latest data available. So, that is heartening, but as I said a number of things are yet to be done.

 Q: Are operational accounts using RuPay card, how many of them are operational?

A: No, again we are getting too impatient about it. Opening the account itself and that is going on in mission mode. Initially, for obvious reasons there was a substantial lag between the opening of account and issuance of RuPay card. Issuance of RuPay card involved some more logistics, which takes its own time.

Q: It gets posted.

A: Yes, But of late the gap has narrowed. So, now we say that accounts opened are around 9 crore, maybe the RuPay card has been issues in 6 crore plus account. Now everything is interlinked. You don’t use a RuPay card on zero balance account. So, the necessary ingredient is that there has to be a balance in the account and moreover the issuance of RuPay card is one thing, then educating the people to use those cards. Let us be mindful of the fact that a number of people who are coming in this maybe a first time user of banking services.

Thursday, October 9, 2014

Jan Dhan target to be met, on paper


Enquiry about a Jan-Dhan account form at a Bank of Baroda branch in the National Capital Region (NCR) was greeted with: but don't you have an account in any bank? After 10 minutes, the form did eventually come, with a stare that had 'why burden us with another account that is going to remain idle' written all over it.

Just a few kilometres away, one of the branches of IDBI Bank had run out of forms. An executive explained that since there was a huge pile of forms yet to be processed, it had been decided to go slow in opening new accounts. A nearby United Bank of India branch is yet to issue RuPay cards to some customers who opened their accounts nearly a month ago. One such customer said: "Bank officials were clearly in no mood to open our accounts in the first place. We were asked to come some other time. When we persisted, they went through the motions. But we are yet to receive anything."

  • 47,630,652 - Number of new accounts opened
  • 13,303,975 - Number of RuPay cards issued
  • Rs 3,226.97 crore - Balance in accounts
  • 36,574,947 - Number of zero balance accounts
Status as on September 23 Source: Ministry of finance

As the Jan-Dhan scheme completes a month since its official launch, reports coming in from various parts of the country suggest the stated target of 75 million new accounts will be achieved much before January 26 next year. But the scheme's implementation is patchy. Agents are charging commissions for filling forms in Bihar. Reports indicate in Madhya Pradesh and Uttar Pradesh, stationery shops are selling forms as bank branches have run out. "These reports are not baseless. Some of these things are happening. But an overburdened banking system cannot be expected to do everything," said an executive with a leading public sector bank (PSBs).

In terms of numbers, the scheme has exceeded expectations. By September 23, all banks put together had opened 47 million new accounts. RuPay cards have been issued to 13 million people. Of all accounts opened in less than a month, 36 million are zero-balance ones.

Bankers this reporter spoke to complain they are flooded with inane queries. What are the benefits of this loan scheme? When will the insurance money come into the account? How much loan can be taken against this account? Can insurance money multiply with multiple accounts and can the RuPay card serve as another proof of identity? "With such a deluge of questions every day, two executives of a bank branch, on an average, are entrusted with the task of dealing with them," said another bank executive. It was bound to have some impact on core banking operations, he added.

The less-than-enthusiastic response of bankers stems from the fact that most branches have been asked to hold 12-hour camps every Saturday. At times, staff are made to come in on Sundays to ensure satisfactory completion of targets. "Even if we take the help of business correspondents, verification of documents and processing of forms have to be done by bank staff. There is a limit to how many forms can be processed in a day," said another executive with a PSB.

Bankers also say multiple accounts might prove a spoiler. "I will say 50-60 per cent of all the accounts that have been opened under the Jan-Dhan scheme are by those who already have accounts in other banks," said the executive of the leading bank. Other bankers concurred. In fact, this reporter came to know about a person who opened a new account under the scheme in the branch where she already had an account. "What is wrong in this? If there is a new scheme, why should we be denied its benefits just because we are already part of the banking network?" her husband, a resident of Ghaziabad, asked.

The one-page account opening form has a column seeking self-declaration that a person does not have any account in any bank. But bankers say the self-declaration is meaningless as there is no mechanism to stop multiple accounts. "If a person has multiple documents as proof of identity, he can open multiple accounts and our system cannot detect it. There is no inter-bank arrangement to stop duplication," said the branch manager of another PSB.

Bankers say accounts opened without valid address proof are put in the high-risk category and these are unlikely to get the overdraft facility. Such account holders will be asked to furnish proof of residence within a year, as is the case with all accounts in the high-risk category. The Bank of Baroda form mentions that eligibility for an overdraft facility of up to Rs 2,000 is "satisfactory operation" of an account for at least six months. "There is a great deal of misconception about the overdraft facility. Those who have opened accounts under this scheme are under the impression that they automatically become eligible for the overdraft facility, which is not the case," said the executive of the leading PSB.

On accident insurance of Rs 1 lakh for each account holder, bankers say it comes automatically with the RuPay card. What it means is that existing account holders who opened their accounts prior to the launch of the scheme may get RuPay cards issued against their old accounts and become eligible for accident insurance. However, bankers are awaiting further instructions on who is going to pay the premium for the life insurance cover of Rs 30,000 that has been promised with each Jan-Dhan account.

Tuesday, September 30, 2014

RBI will cut interest rate at the right time: Financial Services Secretary

Secretary Financial Services G. S. Sandhu announced for meeting with IBA (Indian Bankers Association) today on issues of salary revision of bankers to break dead locks as earliest as possible at an ASSOCHAM event held in New Delhi today.

Reserve Bank of India (RBI) is negotiating with the banks employees as there is a gap between the demand and offer and we will try to resolve the deadlocks very soon”. We are also going to call IBA to break this dead block as earliest as possible, said Mr. Sandhu at an ASSOCHAM event on “ASSOCHAM 10th Annual Banking Summit cum Social Banking Excellence Awards 2014” here today.

Replying on the RBI monetary policy, Mr. Sandhu said, “"RBI fully understands the issue, it fully understands needs and expectation of markets, so they will take a view (on cutting policy rates) when the time is right.”

While addressing the conference, Mr. Sandhu said, one of the important thing which was recently announced was the bank-recapitalization to meet the future challenges for growing economy and high trajectory. The ministry is preparing a blueprint on this and raising capital from the market and from other potential resources”.

He further said, the number of accounts opened under the Pradhan Mantri Jan Dhan Yojana has touched nearly around 5.1 crore account and 1.6 crore RuPay debit cards have been issued so far, said Mr. Sandhu at an ASSOCHAM event
In order to provide the much needed thrust a flagship programme called the “Pradhan Mantri Jan-Dhan Yojana” was announced by Prime Minister. He said, National Mission on financial inclusion encompassing an integrated approach to bring about comprehensive financial inclusion of all the households in the country. The plan envisages universal access to banking facilities with at least one basic banking account for every household, financial literacy, access to credit, insurance and pension facility, said Secretary, Financial Services.

In addition, the beneficiaries would get RuPay Debit card having inbuilt accident insurance covers of Rs. 1 Lakh. The plan also envisages channeling all government benefits to the beneficiaries account and pushing the Direct Benefits Transfer (DBT) scheme of the union government, added Mr. Sandhu.

The technological issues like poor connectivity, on-line transactions will be addressed. Mobile transactions through telecom operators and their established centres as Cash Out Points are also planned to be used for financial inclusion under the scheme, points out the Secretary of Financial Services.        

Mr. R K Gupta, Executive Director of Bank of Maharashtra said, “Financial inclusion is nothing but providing banking & financial services to everyone in fair, transparent & equitable manner and at an affordable cost”.

Mr. Gupta further said, bank have perhaps the largest stake in the success of financial inclusion. However to realize this opportunity, they will need to create an entirely new portfolio of products and services delivered through radically different distribution structures which are aligned to the needs and lifestyles of the financially excluded consumer.

While addressing the conference, Mr. Sunil Kanoria, President-elect ASSOCHAM said that we need to think out of box and experiment with the new models of banking where banking penetration will not depend on bricks-and-mortar offices, but no technology. Mobile banking is something which needs to be considered seriously. Mobile technology has changed our lives and the way we communicate and do business. It has the potential to redefine banking too. There is already a national drive going on in the country to create an electronic infrastructure in the form of Unique Identification Authority of India (UIDAI) or the Aadhaar platform. 

Other who also spoke during the conference were Mr. M. Narendra Chairperson, ASSOCHAM National Council for Banking & Finance and Former CMD, Indian Overseas Bank, Mr. Abizer Diwanji, National Head of Financial Services E&Y, Mr. Nikhil Sahni, Senior President, Government Relationship Management, YES Bank, Mr. R. K. Gupta Executive Director Bank of Maharashtra and Mr. D. S. Rawat Secretary General ASSOCHAM..

Wednesday, September 24, 2014

How to apply for RuPay Card

We have seen a lot of MasterCard and Visa. It is time now to switch over to a card scheme which is more Indian. It looks like that India is now ready to welcome its very own card and payment scheme named as RuPay.

RuPay is going to be an Indian venture into the world of card schemes. However, before you jump the guns, you should know that although RuPay is India’s brainchild, it is not hundred percent Indian. RuPay cards are being created in affiliation with Discover Financial Services, which as we all know, is a US based financial company. Nonetheless, RuPay is going to be more Indian than American.

How to apply for RuPay card?

Many public banks of India have already started offering the RuPay card to the consumers. Therefore, if you want to get the RuPay card you can ask your bank for it. The application process is pretty simple depending upon the bank.

While most of the private banks issue the debit cards over the phone after verifying your identity (by asking the TPIN number), the government or public banks require you to fill the form and follow a process to get the new debit card. You can call up your bank and ask about the process to get the RuPay card issued.

Not many private banks are offering the RuPay cards at this time but it is expected that it will be available soon with all of them. The Reserve Bank of India has mandated RuPay card for all the banks but they have been given some time to get it incorporated in their systems.
If you are an existing customer of the bank which already offers the RuPay card then you can apply for a new debit card. If you are opening a new bank account then at the time of depositing the money you can ask the bank to issue the RuPay card.

Will MasterCard and Visa cards be phased out?

No. Reserve Bank of India has no such plans to phase out the existing and popular Master and Visa cards. In fact, the users of these cards will be able to continue using these cards as they have done before.

With the introduction of RuPay card, there will be a tough competition for these financial giants though. You will be able to use your existing debit cards at all the ATM machines and for online shopping as you used to do it before.

What are the benefits of RuPay card?
There are several benefits of using the RuPay card for the Indians. Since Master and Visa cards are provided by the foreign financial institutions the transaction costs are higher. With RuPay cards, the cost of transaction will be lesser because it will happen within India involving no international processing. People will also enjoy bigger savings due to the low transaction fees.

However, there are certain disadvantages too. For instance, while Master and Visa cards offer the reward points 1on every purchase, there is no such thing with the RuPay cards.

Monday, September 22, 2014

Cutting Down Interest Rates - State Bank of India

Banking major State Bank of India cut interest rates on fixed deposits of some timelines. Deposits between one and three years will now earn a rate of 8.75 per cent as against the earlier 9 per cent. But for short-term deposits, the bank has gone the opposite way. For deposits between 180 and 210 days, interest rates are up to 7.25 per cent from the earlier 7 per cent. 

IndusInd Bank has also cut rates, but this cut is on its savings bank accounts. The bank, which was among those which offered higher interest rates on the savings account, brought down interest rate to 4.5 per cent from 5.5 per cent for daily balances of less than ₹1 lakh. The reduction in rate is effective from September 1. The rate remains the same at 6 per cent for daily balances exceeding ₹1 lakh. 

Universally applicable
The benefits under the Pradhan Mantri Jan Dhan Yojna are not restricted to new bank accounts. Now, the Government has clarified that existing account holders can get these benefits as well, if they so desire. 

The benefits that can be got are the RuPay debit card with an accident insurance cover of ₹1 lakh and the issue of an overdraft of ₹5,000 after satisfactory operations for a period of time. To get these benefits, all that needs to be done is to apply to the concerned bank branch. 

Fund change
Investors in PineBridge mutual funds, take note. Kotak Mahindra Asset Management will acquire the domestic schemes of PineBridge Mutual Funds, subject to regulatory approvals. 

Of the seven schemes from the PineBridge stable, among the larger ones is PineBridge India Equity Standard fund, a multi-cap equity fund. But across the one-, three-, and five-year periods, its returns are below the category’s average. The fund, however, did edge past its benchmark BSE 100 in all periods. 

PineBridge India Short Term fund, its biggest debt fund, has similarly paled in performance compared to category peers across time frames. 

Absorbing these funds into the Kotak Mahindra stable may inject some improvement in performance. Though not top-quartile performers, quite a few funds from the Kotak house are at least mid-quartile performers. Funds such as Kotak Select Focus have recently picked up in performance as well.
In total, PineBridge has an asset size of about ₹635 crore. The Kotak AMC is bigger with assets under management of about ₹35,885 crore.

Monday, September 1, 2014

Jan Dhan Yojana: Many questions remain

The government's financial inclusion scheme, Pradhan Mantri Jan Dhan Yojana, is an empty shell at the moment. The government heralded its achievement of clocking 15 million new bank accounts under the scheme by Thursday and looked ahead to the target of achieving 75 million accounts by January 2015.

In fact, given that the UPA government added an additional 60.9 million accounts in 2013-14, the target is an easy one. The real challenge is of keeping the accounts alive, funding the overdraft mechanism and ensuring confusion over the insurance cover is resolved.

A meeting on Monday in the finance ministry could  resolve some of the make-or-break problems of the grand scheme. The finance ministry will try to resolve the confusion created over the account-linked accident insurance the government has already announced. Other components of the Jan Dhan scheme too are yet to be fleshed out. Each of the new bank accounts is to come with a RuPay debit card, a Rs 5,000 overdraft facility, a Rs 1 lakh accident insurance and Rs 30,000 life insurance. Keeping these accounts running, the insurance-claim system functional, funnelling money through cash transfer mechanisms and making the overdraft facilities financially viable will imply costs for different financial sector actors. Or, more likely, for these costs to be subsidised by the government.

  • Accident insurance cover Meeting on Monday to resolve confusion
  • Funding the banking correspondent model finance unclear. 248,000 correspondent agents in country
  • Cost of overdraft facility No clarity on who shall bear the cost
  • Existing saving accounts without RuPay card not to get other benefits
  • Creating new accounts not a challenge, increasing transaction per account is

k done earlier for the direct benefit transfer and financial inclusion schemes. But this is really several schemes rolled into one over phases and we will have to sort the fine details," said a senior official in the government.

The immediate challenge for the government will be to figure out the financial viability of maintaining the accounts and the linked insurance schemes. The RBI-promoted National Payments Corporation of India (NPCI) which offers the RuPay card, had already given the contract for accident insurance to HDFC Ergo for a period of three years. But this insurance was linked to the transaction history of the accountholder. The industry was led to believe there would be an insurance top-up by the government on this of Rs 1 lakh, costing NPCI Rs 1 per customer every year.

NPCI plans the insurance cost from the income generated out of transaction on the RuPay platform.

For every ATM transaction the issuing bank pays NPCI 40 paise. For every point of sale or ecommerce transaction NPCI gets 60 paise from the issuing bank and 30 paise from the accepting bank. All existing RuPay debit card holders would be able to avail of this facility, sources told Business Standard but not those holding saving accounts without the RuPay card. The card itself will cost about Rs 50 each roughly, though the scale could bring down costs marginally, sources said.

A former banker also noted that the financial viability of running these millions of accounts would depend on the minimum balances maintained and the number of transactions carried out in a year. A source in the government said earlier assessments suggested that out of the 180 million bank accounts opened under the financial inclusion scheme so far, a vast majority sat dormant or unused once they were opened. The RBI also noted that even as the volume of accounts had increased substantially keeping the transactions flowing remained a challenge. In other words, the banking inclusion system generated empty accounts to meet set targets.

Friday, August 8, 2014

Not sharing client data, says NPCI

MUMBAI: National Payments Corporation of India - Reserve Bank of India's brainchild which manages the backbone of the country's payments systems - has been asked to pay a token fine of Rs 10,000 to the Maharashtra treasury for passing on highly sensitive personal data to processing companies without a non-disclosure agreement. NPCI has contested the order by the state government's principal secretary (information technology) denying both charges - of compromising individual personal data and of not having non-disclosure agreements.

The adjudicating officer's order was in an intellectual property rights tussle between two companies that processed card transactions for banks. CredenTek Software, an IT company, had complained against In Solutions Global (ISG), which specialized in processing card transactions for banks. NPCI came into the picture as it emerged that it was one of ISG's major clients.

"We had filed a case against In-Solutions Global for source code violation and as part of our evidence we had submitted CDs containing sensitive personal data of bank customers which was handed to our clients by ISG," said Prashant Mali, Cyber Law & Cyber Security Expert from Mumbai who represented CredenTek for this case.

Hearing both sides, the adjudicating officer - Rajesh Aggarwal, principal secretary (information technology) - said in his order that no case is made out of data theft or source code stealing under the IT Act and it is a dispute regarding contracted services not being rendered rather than a copyright issue. While he dismissed the source code, he said that during the course of hearings, "a more sinister crime of negligence under the IT Act came to light" and expressed shock that real data of bank customer transactions was passed on as sample data for testing software rather than simulated data.

When contacted, NPCI said it does not share any confidential information with any party and has strong privacy policy based on international standard and its and has been awarded certificate for this. NPCI said its electronic clearing and settlement system was "safe and highly secure". and was compliant with Payment Card Industry Data Security Standards. NPCI said it has entered into a non-disclosure agreement with In-solutions Group, which has been filed with the application before the IT secretary of the Maharashtra government - the plea has not been disposed of so far.

"The order passed by the IT secretary against NPCI was without jurisdiction and ultra vires and beyond the powers. There was no proceeding initiated by the IT secretary, government of Maharashtra, against NPCI under any law. Even no notice was issued by IT Secretary before issuing order for payment of penalty. NPCI has already challenged his order as soon as it came to knowledge of NPCI by filing an application for review application," it said in a statement.

NPCI, which manages the ATM switch, Rupay and other payment networks such as IMPS that allow electronic funds transfers between banks, has been upset at the strong remarks made by the adjudicating officer without being heard. In the order, the adjudicating offer had said what was "more worrisome" was that NPCI is also running the Aadhaar Payment Bridge System, which includes Aadhaar number (UID) of the customers. Now, UID number is perhaps the most sensitive data of an Indian citizen, which needs to be protected even more than the Social Security Number (SSN) of USA, as it has linkage to biometrics (fingerprints and Iris). Obviously, UID number cannot be published on any website by any government department, and should be used for any Analytics or any other purpose, only with proper precautions as per Rules 6 and 7 of Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011."

Modi’s Financial Inclusion Plan - Rupay Card News

Who pays Who benefits?

One of prime minister Narendra Modi’s ambitious plans is the massive financial inclusion drive which envisages a bank account for 150 million Indians by August 2018. The idea of financial inclusion is not new—it has been the buzzword at the Reserve Bank of India (RBI) since 2005, but without much success. In fact, several thousand new bank accounts, opened under pressure from RBI, remained dormant or did not have a single transaction. Why will it be different this time? Well, Mr Modi reportedly proposes an overdraft facility of Rs5,000 for each account, besides a RuPay debit card with inbuilt accident insurance cover of Rs1 lakh. The overdraft will be backstopped by a Credit Guarantee Fund.

Had something like this been announced by the Congress government, it would have been immediately dubbed a loan mela or another subsidy scheme. But Mr Modi’s spectacular election campaign and the 12-year Gujarat development record have ensured that doubts and misgivings remain muted.

Financial inclusion and empowering the poor is a necessity. There is no doubt at all that the poor are forced to borrow at significantly higher rates, are badly exploited by moneylenders and also forced to pay more for all goods and services. When financial inclusion was attempted though micro-finance, it led to exploitation by rapacious micro financiers, insurers and others.

Will Modi sarkar succeed in getting the same government officials to deliver where others have failed? Will moneylenders not exploit the Rs5,000 overdraft facility for repayment of old borrowings? What will the Modi government do to prevent poor, unbanked, rural folk from blowing up the overdraft, as they usually do, on marriages and religious ceremonies and on liquor?

It is significant that KR Kamath, chairman of the Indian Banks Association, while talking about how bankers were working overtime on this project said, “More than being commercially viable, it is important to link every household with the banking system.” But what happens when the overdraft has been spent and there is a default in the books of our nationalised banks? It will not only be a cost to the exchequer, but all the householders, who were recently included, will be excluded from the system again. We will watch for answers, when the prime minister unveils his grand plan for financial inclusion from the Red Fort on Independence Day.

The second phase of the financial inclusion plan talks about a pension scheme for the lower income and unorganised sector and micro-insurance through the nationalised insurance companies. Premium for insurance products will come from schemes like the Rashtriya Swasthya Bima Yogana.

A catchy name, terrific tag line, nice logo and a marketing blitzkrieg is all very well, but we would much rather hear a discussion on how the Modi government has studied and fixed all the leakages and malpractices that prevented government-directed financial inclusion and insurance schemes from working.

Instead, all we are hearing from officials and bureaucrats, desperate to please a powerful prime minister, is about the spending and hiring spree (20,000 ATMs, 50,000 banking correspondents and 7,000 branches) planned to meet the ambitious targets.

Monday, July 28, 2014

Himachal Coop Bank launches RuPay Kisan Credit Debit Card

RuPay Credit Debit Card Launched

Shimla: To enable easy credit and debit facilities for the farming community, Himachal Pradesh State Cooperative Bank (HPSCB) today launched the RuPay Kisan Credit cum Debit card.
Bank authorities claimed that HPSCB had become the first cooperative bank in the country to introduce the service for its largely rural customers.

RuPay Credit Debit Card Launched

Launched by chief minister Virbhadra Singh, on the occasion he said, “HPSCB having kept pace with the changing times in banking services like introducing core banking solutions and now launching of RuPay credit debit card would go a long way in providing efficient services to farmers and other customers.”

Chairman HPSCB Harsh Mahajan informed that the Bank through its more than 207 online branches and extension counters was extending prompt and uninterrupted services, particularly to the farming and horticulturalist communities.

Being one of the first cooperative banks in the country to introduce ATM services, the management plans to open four new branches at Golthai in Bilaspur, Gattadhar in Sirmaur, Rajnagar in Chamba and Mandal in Shimla soon.

Besides licenses for starting nine extension counters at Kudu in Shimla, Nanawan and Kothipura in Bilaspur, Bir Road Ahju and Ropri in Mandi, at Obri and Sarol in Chamba, Kamlanagar and Matiana in Shimla have also been granted by Reserve Bank of India, said Mahajan.

Talking about the RuPay credit-debit card, Amitabh Awasthi, managing director HPSCB said that it would facilitate farmers to use their own money or the money loaned from the bank with ease for undertaking seamless transactions for buying agricultural inputs, such as fertilizers, pesticides or mechanized tools such as spray pumps, when required.

Earlier, Harsh Mahajan presented a cheque of Rs. 21,65,760 as dividend for the year 2012-13 and contributed a Rs 51 lakh cheque towards the Chief Ministers Relief Fund to Virbhadra Singh.

Tuesday, July 22, 2014

Popularising RuPay Card - State Bank of India Initiative

The State Bank of India, the largest public sector bank started issuing RuPay cards  three months back and has realised the benefits of it.

In India, 90 per cent of credit card transactions are domestic; however, the cost of transactions is high due to monopoly of foreign gateways like Visa and Master cards.

If this process of transactions is made India-centric, cost can come down drastically. In the last 3-4 decades, the usage of credit and debit cards -- what we call the plastic money -- has increased manifold.

Their usage has actually multiplied in the past one decade due to emergence of e-commerce. We can not only make purchases of our needs from a big store by swapping our credit or debit card, we can even purchase air, train, bus ticket; or any commodity from e-commerce websites using this plastic money.

Though banking is no new business in India and credit and debit cards have been issued since long ago; however, these credit and debit cards had essentially been issued in partnership with international gateways like Visa and Master card. It is notable that Visa and Master cards make huge bucks from this business.

According to world Line India, a leading agency providing services in the field of electronic transactions, there are nearly 20 million credit cards in the country; and HDFC Bank, State Bank of India, ICICI Bank and Axis Bank are the main banks issuing most of the credit cards. Apart from this, there were 389 million debit cards in the country in March 2014.

During the last one year (2013-14) 58 million new debit cards were issued. It is notable that after the ATM machines were started being used, all banks have been issuing debit cum ATM cards to their customers, which can be used not only for withdrawing money, but also for making transactions at stores and e-commerce websites.

Foreign gateways like Master and Visa cards charge fee in lieu of their services and huge sum of foreign exchange gets transferred abroad by these companies. Due to monopoly of Master and Visa cards, a hefty fee is charged by them.

Their business in India has been increasing leaps and bounds in the last 10 years. According to RBI, credit cards transactions were Rs 1.56 lakh crore and debit cards transactions Rs 20.22 lakh crore during the year 2013-14.

Foreseeing the importance of an Indian Card, Reserve Bank of India, desired to start an Indian card and National Payment Corporation of India (NPCI), realised this desire and an Indian card in the name of RuPay was started on March 26, 2012.

Today in­­­creasingly the transactions of a majority of Indian banks and financial institutions are being facilitated by RuPay and it is giving a  tough competition to Visa and Master card. NPCI has also tied up with Discover Financial to give RuPay an international acceptance.

International acceptance 

RuPay global card is now accepted at ‘Discover Global Payment Network’ internationally. RuPay was dedicated to the nation on May 8, 2014 by the President of India, Pranab Mukherjee.

RuPay card is accepted on all ATM machines under national financial switch of NPCI. According to the NPCI data there are 1,45,270 ATMs and 8,75,00 points of sale which come under RuPay platform. In addition to this RuPay is accepted on nearly 10,000 e-commerce websites.

Banks recognised by NPCI for this purpose can issue RuPay credit and debit cards which are accepted in ATMs, Points of Sale (PoS) and e-commerce websites. As of now about 240 banks have been issuing RuPay cards. Along with this 200 cooperative and rural banks are also issuing RuPay cards, giving a boost to financial inclusion.

Kotak Mahindra Bank has started a new initiative on financial inclusion; whereby farmers of 75 cooperative societies can get payment for their milk directly to their bank account.

This model is destined to be implemented in Gujarat, where 3 lakh farmers of 1,200 societies will benefit.

It is notable for domestic sector that RuPay fee is merely one third of Master and Visa cards. Though RuPay is cost effective private banks are still not cooperating in adopting RuPay.

Around 150 lakh RuPay cards in circulation now have so far been mostly issued by public sector banks. Argument of private banks is that since they have long period tie-ups with Master and Visa Cards, they cannot adopt RuPay till these agreements expire.

Though private Indian and foreign banks know that in the long run RuPay would prove to be beneficial, they are not ready to adopt new card looking at their short term interests.

The State Bank of India, the largest public sector bank has started issuing RuPay card only three months back and has realised the benefits of the same. According to SBI officials, though it has long term agreement with Master and Visa cards, still it would be good for the bank to pay money to them and switch over completely to RuPay.

Experts believe that if only SBI adopts RuPay fully, the scheme would be a success. Although for international operations, fee of RuPay is yet to be decided, the NPCI says that it would be better to keep it low to maintain it attractiveness in international business also.

In the first week of July 2014, the secretary, department of financial services of the Union ministry of finance has written to CEOs of all the public sector banks urging them to issue RuPay cards to all new customers and the existing customers who have not been issued debit cards so far.

Banks have also been asked to install RuPay card terminals in commercial establishments. So far there is a system of issuing only one type of debit card; however if one desires to get Master and Visa card, he/she can be issued the same along with RuPay card.

Those who are used to Master or Visa card need to be lured gradually towards using RuPay as it will prove to be a win-win situation for all, as it would not only reduce cost of transactions significantly, but also increase the card penetration in the country, especially rural areas.

Friday, June 20, 2014

Rupay Kisan Credit Card Scheme to start from July 12

 REPRESENTATIVE IMAGE: As per the RBI guidelines, farmers across the country are to be issued credit cards to boost paperless cash credit system by March 2015. 

CHANDIGARH: Farmers across the states for the first time will get facility of credit cards by the end of financial year in the country. The RBI mandated scheme is targeted to provide ease of transaction through credit cards to farmers instead of prevailing cheque based Kisan Credit Cards.

The NABARD funded program is being undertaken by National Payment Corporation of India. As per the RBI guidelines, farmers across the country are to be issued credit cards to boost paperless cash credit system by March 2015. The initiative is part of the modernization bid of cooperative banks to aid them tackle competition from the commercial banks.

"Axis Bank will be sponsor bank to issue credit cards to farmers in Haryana covered by the Central Cooperative Banks," managing director, HARCO State Cooperative Apex Bank, Naresh Chaudhry said.

In Haryana the new scheme known as 'Rupay KCC Card' will be launched from Ambala on July 12 on the occasion of foundation day of National Bank for Agriculture and Rural Development (NABARD). This State wide scheme will be launched from Cooperative Bank of Ambala

As per the scheme, farmers covered under Primary Agriculture Co-operative Societies will get facility of credit cards for paperless loans for crops and other needs. Under the scheme, the loans will incur interest of 7 per cent up to the limit fixed under the Kisan Credit Card scheme. At present crop loans up to 3 three lakh are provided to farmers under Kisan Credit Card Scheme. "In Haryana farmers are provided interest subvention of three per cent in case of timely payment," CEO, Amabala Central Cooperative Bank Gurpreet Kaur said.

"It will reduce transaction cost of banks and also provide ease of credit transactions to farmers," says CEO, Gurgaon Central Cooperative Bank, Ved Parkash Yadav.

Cooperative banks in the country are burdened by rising Non Performing Assets and credit cards are suspected to further deteriorate the asset quality of the banks. " Ease of credit will encourage farmers to pay back loans on time," says Yadav.The scheme could provide new lease of life to cooperative banks that are losing ground to commercial banks. "Crop loans is mainstay of business of cooperative banks unlike commercial banks," says Yadav.

Thursday, May 8, 2014

Pranab launches RuPay, India’s own card payment network

President Pranab Mukherjee during dedication of the

President Pranab Mukherjee on Thursday dedicated to the nation indigenous card payment network called RuPay taking on the global players like Visa and MasterCard.

The new payment network developed by the National Payments Corporation of India (NPCI), a not-for-profit company envisioned by the Reserve Bank of India (RBI) and created by the banking industry, covers all the automated teller machines (ATMs) and most of the retail and e-commerce platforms. 

RuPay is the coinage of two terms Rupee and Payment. 

“Dedication of RuPay to the nation is symbolic of the maturity of the payment system development in India,” Mukherjee said after formally launching the card at a function at Rashtrapati Bhavan.
He pointed out that with the launch of new system, India has now ranked among the “few countries in the world to have such a network built domestically to meet the card-based payment system needs of the country.” 

RuPay cards are accepted at all ATMs, more than 90 per cent of ‘Point of Sale’ (POS) terminals and more than 10,000 e-commerce merchants across the country. 

“It is also heartening to note that a few banks have started issuing cards which are accepted internationally through the network of an international partner,” Mr. Mukherjee said.
RuPay Scheme provides flexibility to card issuing banks to issue special purpose cards like Kisan Cards, Milk Procurement Cards, Grain Procurement Cards and Financial Inclusion Cards.
A variant of the card called “Kisan Card is now being issued by all the Public Sector banks in addition to the mainstream debit card which has been issued by 43 banks”. 

More than 150 cooperative banks and the Regional Rural Banks (RRBs) in the country have also issued RuPay ATM cards. The total number of cards issued as on date is 17 Million and is growing at a rate of about three million per month. 

Mukherjee said card—based payment transactions in India is set to grow rapidly in the coming years as the economy matures and internet penetration increases. 

“An indigenous system like RuPay will, hopefully, not only reduce the dependence on cash and cheque modes of settlement but will also make it easier to offer products based on specific requirements of diverse user sets within the country,” the president said.

Monday, October 21, 2013

Banks yet to cut debit card fee at fuel pumps - Rupay Card

A year after the Reserve Bank of India (RBI) announced a cut in charges on debit card transactions, banks continue to impose a fee of 2.5% for payments at petrol pumps, thereby making an undue gain at the cost of the consumer. Earlier this month, large banks thwarted an attempt by the RBI-promoted National Payments Corporation of India (NPCI) from capping charges on debit cards that are part of NPCI's Rupay network.

Last year, RBI asked banks to cap the charges on debit card transactions at 0.75% for transaction values up to Rs 2,000 and 1% for larger transactions. But in debit card transactions at petrol pumps, banks continue to impose a 2.5% surcharge, which are mostly passed on to the consumer.

Sources said that NPCI had sent a communication to banks asking them not to charge more than 1% on its Rupay cards. Rupay cards were introduced by NPCI as India's answer to MasterCard and Visa. Sources said that the move has been stymied by banks who have called for more discussion on the issue.

The 2.5% surcharge has its origins in the days when credit cards were in their infancy and debit cards non-existent. Typically, when a bank installs a credit card swipe machine at a retail outlet, its agreement with the merchant bars any kind of surcharge being passed on to the customer.

But in the case of petrol pumps and Indian Railways, an exception was made allowing them to pass on the charges (described by banks as 'merchant discount rate'), to the customer. The exception was made to end an impasse where these government entities were refusing cards on the grounds that their margins were too low to absorb the credit card charges of 2.5%.

RBI, while slashing charges on debit cards, had used the rationale that the transaction cost of credit and debit card should not be identical. This was because credit card transactions required the bank to provide free credit to the customer until the monthly bill was issued. The bank also took on the risk of the customer defaulting on his obligations.

In debit cards, the money goes straight out of the customer's bank account and the only expenses are on account of using the network and in respect of security of transaction. In the West, regulators have already started capping charges on debit card transactions.

Bankers say that a huge transformation is taking place in payments as debit card transactions are set to outstrip payments by credit cards in coming years. In July 2013, banks saw 4.23 crore credit card transactions as against 5.24 crore debit card transactions. In value terms, however, credit card transactions continue to be higher at Rs 11,038 crore as against Rs 7,722 crore under debit. With the focus now on financial inclusion, the number of debit cards and set to go even higher.

Wednesday, September 4, 2013

New RBI Governor Raghuram Rajan unveils big initial package, promises more


New RBI Governor Raghuram Rajan on Wednesday came out with a slew of measures, including more trade settlement in rupees to rescue the battered financial markets and hinted at a shift in focus from inflation control, doggedly pursued by his predecessor, to boosting growth.

Shortly after he took over as the 23rd Governor of the central bank, Rajan, 50, addressed the media with a prepared statement in which he laid out a detailed road map for his innings in the short term, which he called a "big initial package."

He also rescheduled by a few days the date for his much- anticipated first monetary policy statement to September 20. The new Governor set up a number of committees for revising and strengthening monetary policy framework, financial stability, financial inclusion, NPAs and an outside panel of experts headed by former Governor Bimal Jalan to screen applications for new bank licenses. Rajan said the new bank licences will be issued around January next year.

Apparently reflecting a shift in the approach from his predecessor D Subbarao, who had serious differences with the government of late, Rajan said the primary role of the bank is monetary stability to sustain confidence in the value of the rupee.

"Ultimately, this means low and stable expectations of inflation, whether that inflation stems from domestic sources or from changes in the value of the currency, from supply constraints or demand pressures.
"...but we have two other important mandates; inclusive growth and development, as well as financial stability," he said.

Asked about Subbarao's focus on targeting inflation, Rajan said he would reserve his comments till September 20. Rajan said the bunch of reforms has been unveiled today to enhance growth.
"I think there are so many low-hanging fruits in the economy that if we only pluck them we can accelerate growth substantially." The former IMF chief economist and economic advisor to the Finance Ministry said there were some positive developments in the economy which will help to boost growth.

The measures disclosed to support the rupee include liberalisation of the financial market by enhancing the limits for exporters to re-book cancelled forward exchange contracts and opening a special concessional window for swapping foreign currency non-resident (FCNR) deposits and dollar funds. "My sense is that we certainly don't need false optimism. But I think there is good reason to believe that in the medium run, the future of the country is strong," he said.

Asked about Standard and Poor's downgrade threat, he said the international rating agency "nearly reiterated what has been its long standing claim about there being one-third possibility of a rating is not something new. So I won't read too much into the statement."

The measures announced by Rajan include enhancing the re-booking limit on cancelled forward exchange contracts for exporters to 50 per cent, extending a similar facility to importers and introducing cash settlement in 10-year interest rate future contracts to develop the money and G-sec markets.
Rajan indicated the RBI will take steps to reduce the Statutory Liquidity Ratio (SLR) and introduce greater regulatory and supervisory control over the domestic operations of foreign banks. He promised to give freedom to banks to open branches without prior RBI permission.

The new RBI chief also said he will steadily liberalise the markets and lift restrictions on investment and position-taking, together with Sebi, and will examine introduction of interest rate futures on overnight interest rates.

While the RBI has enhanced the re-booking limit on cancelled forward currency contracts to 50 per cent for exporters, importers will be allowed a 25 per cent limit.The central bank will push for more trade settlements in rupees and open up the financial markets for those who receive rupees to invest it back in.

Rajan said the RBI will raise the overseas borrowing limit of 50 percent of unimpaired Tier I capital to 100 per cent for banks and will introduce cash-settled 10-year interest rate future contracts.
The central bank will also examine introduction of interest rate futures on overnight interest rates; steadily but surely liberalise markets, restrictions on investments and position-taking; and issue inflation-indexed savings certificates tied to CPI to retail investors by end November.

He stressed on the need to reduce the requirement for banks to invest in government securities in a calibrated way and will push foreign banks to set up wholly owned subsidiaries.
Rajan proposes to collect credit data, examine large common exposures among banks and encourage banks to clean up their balance sheets.

Referring to the announcements, he said, "This is a part of my short-term time-table for the Reserve Bank. It involves considerable change, and change is risky. But as India develops, not changing is even riskier. We have to keep what is good about our system, of which there is a tremendous amount, even while acting differently where warranted."

He also announced a committee headed by RBI Deputy Governor Urjit Patel to strengthen monetary policy framework. The panel will submit its report in three months.

Rajan said that a committee under former Governor Bimal Jalan would screen bank license applicants after an initial compilation of applications by the RBI staff.

He said new bank licences will be announced "within, or soon after, the term of Deputy Governor Anand Sinha, who has been shepherding the process. His term expires in January 2014."
Financial sector expert Nachiket Mor will head a panel to suggest steps to promote financial inclusion. Another committee, to be headed by Deputy Governor K C Chakrabarty, will take a close look at rising NPAs and suggest steps to improve the recovery of bad debts.

"While the resumption of stalled projects and stronger growth will alleviate some of the banking system difficulties, we will encourage banks to clean up their balance sheets and commit to a capital-raising program where necessary. The bad loan problem is not alarming yet, but it will only fester and grow if left unaddressed," Rajan said.

Stressing that India is a fundamentally sound economy with a bright future, the new RBI chief said, "Our task today is to build a bridge to the future, over the stormy waves produced by global financial markets. I have every confidence we will succeed in doing that."

Tuesday, September 3, 2013

Reaching out to farmers, the electronic way

India’s first card payment network, RuPay, similar to Visa and MasterCard, is changing the way farmers are banking 

RuPay, India’s first card payment network similar to Visa and MasterCard, is changing how farmers are banking and handling their money. 

Take the case of Mahesh Kumar, 38, a farmer on the outskirts of Mumbai. He used to withdraw the entire Rs.1.5 lakh of annual farm credit he was entitled to under the Kisan credit card scheme in a single instance, and end up paying huge sums in interest.

Last year, he began using a RuPay Kisan card instead to withdraw smaller sums of his entitlement from automated teller machines as well as to make payments at retail stores. “It has made life very easy. Now, I can withdraw small amounts of money any time and save on interest costs,” he said.

Crop loans of up to Rs.3 lakh are disbursed at an annual interest rate of 7%, according to the ministry of agriculture’s website. The government provides interest subvention of 3% per annum on prompt repayment, effectively making the crop loans available at 4%.

The Kisan credit card was launched in 1998-99 by then finance minister Yashwant Sinha to help farmers make smarter decisions on how to use cash for cultivation rather than depend on suppliers who were funded by banks.

RuPay was conceived to offer a domestic system that will allow all Indian banks and financial institutions to participate in electronic payments. Through RuPay Kisan cards, farmers are now able to make electronic payments. For a bank, the RuPay cards mean lower transaction costs than MasterCard- or Visa-branded cards.

RuPay was launched in March 2012 by the National Payment Corp. of India (NPCI), and currently cards affiliated to it are issued by 20 state-run banks, six private banks and 84 cooperative and gramin banks that cater to people in small towns and villages.

“We now have 6 million cards in circulation, out of which 2.7 million are Kisan cards, 2.5 million are with cooperative banks and the remaining are with mainstream banks,” said A.P. Hota, chief executive and managing director of NPCI. He hopes to issue 150 million cards in two-three years.

On 6 August, Dombivali Nagari Sahakari Bank Ltd became the first scheduled urban cooperative bank to introduce RuPay debit cards. Milind Varerkar, general manager, said it was “the first time we issued debit cards and it is through the RuPay network, as the Visa and MasterCard software loading proves to be very expensive”.

“From a bank’s perspective, RuPay network is cheaper,” said C. Sumoth, chief manager (priority sector advances department), Federal Bank Ltd. “It will help a bank save at least 25-30% on switching and cardholding cost compared with using a Visa or a MasterCard platform.” Federal Bank has issued 10,000 RuPay-branded debit cards since it launched these in April.

“Competition is always welcome,” said Visa Inc.’s group country manager for India and South Asia Uttam Nayak. “We undeniably accept that they (RuPay) have support of the government,nationalized banks and shareholder banks, but the market opportunity is huge.”

Calls to Ari Sarker, division president, South Asia, MasterCard Worldwide, went unanswered.
In June, NPCI also launched PaySecure for RuPay cards, an e-commerce system similar to PayPal that allows secure online payments. Until now, these cards worked only at ATMs and point-of-sale terminals at retail outlets.

Shekhar Ganapathy, general manager for South Asia at ACI Worldwide Inc., which provides software for banks to help recognize transactions made through RuPay cards, believes the network has a good chance of success if its reach improves.

According to the Reserve Bank of India, there are around 120,000 ATMs and about 1 million point-of-sale (PoS) terminals in the country. While customers can use RuPay cards at all ATMs, most PoS terminals are yet to be configured to accept it. “As of now, only 25-30% of the PoS machines in the country accept RuPay card. Hence, there are issues when it comes to swiping the cards at other terminals,” said Sumoth of Federal Bank.

The penetration of RuPay cards is slow, admitted Hota. “Out of the nine lakh (900,000) PoS terminals, RuPay works on 2.7 lakh terminals,” he said, attributing the delay in acceptance to software upgradation that is being done manually. “To get private sector banks and mainstream banks to convert to RuPay cards full-time will be our biggest challenge,” he said.

RuPay will soon be available as an international card in collaboration with DFS Services Llc, a US payment network. “RuPay, by default, is a domestic card, but an international variant will be available soon,” Hota said.

RuPay is a step in the right direction and a starting point that can be applicable to the rest of the market,” said Bharat Poddar, partner and director, Boston Consulting Group. “And with RuPay set to launch international cards, it can help solve the problem that inhibits its acceptability in high-end markets.”

Monday, July 15, 2013

Co-operative banks may get a breather in Rupay Card launch

Cooperative banks are likely to get more time to comply with the new regulations of Reserve Bank of India (RBI) on banking operations as neither the Central government nor the regulatory bank has completed the preparations to switch over to the new payment regime.

The RBI had set June 30 as the deadline for cooperative banks to abide by a four per cent capital adequacy norms and insisted that cooperative banks should make agriculture lending through RuPay cards. The RuPay-enabled credit card is the Indian domestic card payment network set up by the National Payment Corporation of India. The RBI had said that core banking solutions should be introduced in the primary cooperative banks through the District Cooperative Banks and agriculture lending should be routed through RuPay cards. On insisting to ensure four per cent capital adequacy, the banks will have to maintain a capital of Rs.4 for every Rs.100 lent. This was proposed to be progressively increased to seven per cent by 2014 and nine per cent by 2015. Non-compliance would have lead a total freeze on the banking operations and agriculture lending would have been the first casualty.

Banking sector sources told The Hindu here that neither the Centre nor the RBI had issued any instruction so far on the action to be initiated against the banks which had not moved over to the proposed payment system. This was mainly on account of the delay in distributing the RuPay cards and also completing the work on core banking solutions. It may take at least a year to complete such procedures and the cooperative sector would get a breather till then.

The distribution of Kisan Credit Cards (KCCs) had also not made much headway in the State since September last. As per the statistics available on September 30 last, 6,94,406 cards were distributed through cooperative banks and 1,49,279 cards through Regional Rural Banks. 

When compared to other States, Kerala has a unique cooperative movement with a strong network of 1,603 primary banks and 14 district banks that come under the apex State Cooperative Bank with deposits to the tune of Rs.82,000 crore. A lion’s share of the deposits, roughly about Rs.60,000 crore, have been mobilised by the primary banks which cater to the primary financial needs of small, medium, and marginal farmers as well as traders and others at the grass-roots level.

Kerala will thus perhaps be the only State to be hit hard by the guidelines. But it may not be able to garner the support of other States to mount pressure on the Centre for an exemption from the regulator bank, sources said.

Wednesday, June 26, 2013

RuPay cards can be used online

Account holders in rural banks and small cooperatives can now make online purchases with the National Payment Corporation of India launching an e-commerce solution for its RuPay card. RuPay is India's answer to Visa and MasterCard and has been set up at the behest of the Reserve Bank of India (RBI) to bring down transaction costs and spread electronic payments.

"Functionality across ATMs, credit card point of sale terminals and over the internet are the holy trinity of any electronic payment service. Until now, the card could be used in ATMs and as a debit card only. Now, with the e-commerce platform also available, banks should have no reluctance in issuing RuPay cards," said A P Hota, MD & CEO, NPCI.

Over 30 lakh RuPay cards have been issued since it was launched in March 2012. RuPay debit cards are being issued by 20 commercial banks, 32 RRBs and over 75 co-operative banks. As against this, commercial banks have already issued over 30 crore debit cards, most of them on the Visa and MasterCard network.

What makes RuPay transactions distinctive from Visa or MasterCard transactions is that the ATM pin number doubles as the secure code since RuPay manages both the ATM and e-commerce network.
Speaking at the launch, H R Khan, deputy governor, RBI, said that the objective was to ensure that RuPay transactions touched every Indian by 2020.

"The whole purpose of a payment system is to reduce the use of cash. One of the unintended consequence of increasing the number of ATMs has been that demand for cash has actually gone up," he said.
Khan said that RBI has directed banks to improve the security level on cards by introducing a chip and pin-based payment system by end-June 2013. "We will be reviewing the progress in the next couple of days," he said.

The company will set up machines and earn revenues from fees for every transaction from the card-issuing bank.