Recently launched by the Prime Minister, e-RUPI is a digital prepaid, purpose- and person-specific payment utility. It brings the ease and simplicity of UPI to the social security platform of DBT, two pioneering fintech offerings of India.
As a one-to-many payments facilitator, it will help the government sharpen targeted welfare programmes. The private sector will find it helpful to disburse non-cash benefits to employees and support focussed CSR programmes. Later, individuals could use it for gifting.
Its immediate and first-use case is to facilitate cashless service at paid Covid vaccination centres (CVCs). For instance, corporates and philanthropies can buy services in bulk to vaccinate employees and those in need. The intended beneficiaries will receive an SMS or QR code on their feature/smartphone, redeemable for cashless vaccination at participating centres. A single-source MIS gets created effortlessly at the back end.
Built on the UPI platform, e-RUPI is easy to scale by the issuer. At the point of presence, the verification code received by the beneficiary is shared with the service provider to authenticate and authorise the transaction: Contactless, real-time payment and online settlement of funds into the service provider’s bank account. Fourteen leading banks have already integrated it with their systems.
The deployment of e-RUPI for vaccinations is a forerunner to myriad applications, some of which can help mitigate hitherto intractable problems of delivering cash subsidies and ensuring their end-use.
Policymakers have debated whether direct cash transfers deliver benefits more efficiently than in-kind transfers like the Public Distribution System (PDS) and fertilisers. The Covid-19 pandemic has revived interest in Universal Basic Income (UBI). A school voucher programme has its votaries. The contrary argument is that cash transfers are no magic bullet, given the widespread failure of markets in serving the poor. The utility of cash transfers to guarantee food security or generate sustainable livelihoods compared to PDS or MGNREGA, for instance, is considered suspect. e-RUPI could break the policy logjam by making cash transfers purpose- and person-specific, freeing them from dependence on bank accounts and providing visibility from the time of issue until redemption.
e-RUPI could make the PDS programme more efficient. The inefficiency of the programme is rooted in high overhead costs, leakages, exclusion and inefficiencies. A food-specific e-RUPI voucher will allow beneficiaries to buy rations from an outlet of their choice. The value addition beyond the One Nation, One Ration Card will come from removing price distortion and the redemption of the voucher at market price by merchants within and outside the PDS network.
It could also be used to streamline fertiliser subsidies to farmers. e-RUPI will enable farmers to buy fertiliser at nominal prices with direct credit of the subsidy amount into the account of the authorised dealers. As far back as 2011, a task force on direct transfer of subsidies on kerosene, LPG and fertilisers headed by Nandan Nilekani had suggested a roadmap for direct cash transfer of fertiliser subsidies in a phased manner. Its recommendations on the LPG subsidy got implemented with desired results. The ones relating to fertilisers have not happened. The e-RUPI will allay apprehensions about creating an IT infrastructure, managing nearly 3,00,000 fertiliser sale points, the collapse of dealer network due to liquidity squeeze in the event of subsidy payments getting delayed and a complex system of timely credit of subsidy into an estimated 129 million Aadhaar-linked bank accounts of farm households.
e-RUPI is almost custom-designed for school voucher programmes. The efficacy of these programmes is well established in many countries. Identified students receive vouchers to pay school fees and expenses at empanelled institutions of their choice, public and private, which compete to get full fee-paying students: The resultant option and competition benefits students and schools while enhancing transparency and accountability.
Another application is in basic income support. The lockdowns to contain the pandemic exposed the poor to acute distress, due to loss of means of livelihood. e-RUPI can mitigate their stress by rapidly distributing food and cash vouchers at scale.
A similar application of e-RUPI can be envisaged for the Ayushman Bharat healthcare initiative. Beneficiaries will receive e-RUPI vouchers of designated value tenable at empanelled healthcare facilities, providing them portability and facility choice. The service provider will benefit from the immediate payment.
Corporate applications of e-RUPI include scrupulous disbursement and easy compliance of providing employee benefits with tax implications such as meals, education, travel and health.
The adoption of e-RUPI in various government programmes will enhance business efficiency, simplicity, transparency, and accountability in these programmes.
The Aadhaar experience suggests ownership must vest with a specific agency. Without the UIDAI nurturing its applications within the government and the private sector, the widespread adoption of Aadhaar would not have been possible. Making the distribution and acceptance of e-RUPI incentive-compatible is recommended, as demonstrated by the popularisation of prepaid telephony by the telecom industry.
Light regulation and the opening of e-RUPI to competition will spur innovation and adoption. All banks, small and big, NBFCs, non-bank PPI issuers, and telcos may be allowed to issue it later. e-RUPI opens up a world of opportunities to the government, people, and businesses to provide, avail and pay for services seamlessly.
This column first appeared in the print edition on August 13, 2021 under the title ‘An e-RUPI in hand’. Sharma is the CEO of National Health Authority and Singh is a former member of the Postal Services Board. Views are personal.