Payment system to fix last mile will roll out this month

UPI would help save a villager the trouble of having to visit the bank to withdraw money and allow shopkeepers, not having a point of sale device, to receive payment.

Raghuram Rajan

A >Unified Payment Interface to address the last mile problem in the banking industry will become operational this month, Reserve Bank of India Governor Raghuram Rajan said on Monday.

“I am assured that by this month” it will become operational, Mr. Rajan said of the “interesting technology” platform that the National Payments Corporation of India is developing. Mr. Rajan, who was addressing a seminar on financial inclusion at the National Institute of Rural Development in Hyderabad, counted UPI among tools to improve access to banking.

Money could be transferred, using the mobile app, to another account. The parties to the transaction need not divulge bank details other than the aliases given by their banks. UPI would help save a villager the trouble of having to visit the bank to withdraw money and allow shopkeepers, not having a point of sale device, to receive payment.

“With the price of smartphones falling, we are on verge of solving the last mile problem... the villager need not walk down the mountain to get to a bank account,” he declared. Advent of postal payment bank would provide access to formal financial system. Likewise, once telecom affiliated payments banks come in the number of cash-in cash-out points would multiply, he added.

On improving access to credit, he said “MSMEs get squeezed all the time by large buyers, who pay after long delays.” This contradiction of a large buyer, often public sector firms, with easy access to credit squeezing the small supplier who has very little access to credit, is, however, not unique to India. “Walmart is one of the toughest in squeezing small borrowers for credit.”

Discounting systems

Stating that MSMEs would be better off if they could sell their claim on the large buyer in the market, Mr.Rajan said the three trade receivable discounting systems licensed by RBI should start functioning this fiscal. This would reduce transaction costs as a result of the automation of the process.

The RBI Governor also mentioned the measures being initiated to simplify the process of know your customer (KYC) requirement, which includes self-certification of current address if proof of permanent address is available. The Indian Banks Association, he added, had also been asked to bring out forms in local languages detailing the minimum document stipulated by RBI for opening a basic account.