All you need to know about e-RUPI, India's newest digital welfare drive

As digital payments become ubiquitous in India, with the Unified Payments Interface or UPI seeing record volumes each month, the government seems to have devised a plan to leverage the digital infrastructure for ensuring leak-proof delivery of its welfare schemes.

The idea is simple and is being used in the US, Hong Kong and several other countries -- prepaid vouchers meant for specific purposes. As a leader in fintech, and given its penchant for techno-solutionism, India is attempting something similar.

On Monday, Prime Minister Narendra Modi launched the e-RUPI, a person-specific and purpose-specific payments system.

In essence, e-RUPI will be like the gift vouchers one gets after making a payment through Google Pay. These vouchers are redeemable at a specific store, with certain terms and conditions. e-RUPI will operate in a similar fashion. To put it simply, these are prepaid gift vouchers that will be delivered to the mobile phones of the beneficiaries of welfare schemes in an SMS string or a QR code. These vouchers will be redeemable at specific accepting centres.

It is expected that since these vouchers can be delivered through SMS, even those with feature phones will be able to access their benefits under a welfare scheme. e-RUPI vouchers won’t require the beneficiary to either download a specific mobile app or even have an internet connection. These vouchers will not require the beneficiary to have a bank account, thus ensuring access to welfare benefits for the unbanked population.

In a statement, the Prime Minister’s Office (PMO) said e-RUPI is expected to be a revolutionary initiative in the direction of ensuring a leak-proof delivery of welfare services. It also ensures that the payment to the service provider is made only after the transaction is completed.

Being prepaid in nature, it assures timely payment to the service provider without the involvement of any intermediary, the statement said.

e-RUPI has been built by the National Payments Corporation of India (NPCI) on the UPI platform. NPCI has onboarded banks as issuing entities. According to a Bloomberg report, the Reserve Bank of India (RBI) will also approve payment service providers and entities which hold licenses for prepaid instruments to issue e-RUPI vouchers.

Any corporate or government agency will have to approach the partner banks, which include both private and public sector banks, to issue e-RUPI vouchers to an identified set of beneficiaries. The beneficiaries will be identified using their mobile numbers. At the time of making the payment through the voucher, there might be a one-time password delivered to the beneficiary for two-factor authentication. The merchant will only require an application to scan and accept the e-RUPI voucher and OTP.

These vouchers can be used for a single transaction and are non-transferable. The Bloomberg report mentions that there might be a maximum payment limit of Rs 10,000 for one voucher.

e-RUPI comes when the government is facing increased scrutiny over the efficacy of its welfare measures amid the Covid-19 pandemic. Amid the migrant exodus from India’s cities during the countrywide lockdown to curb the spread of Covid-19 last year, the government had talked up its direct benefit transfers (DBT) to bank accounts of beneficiaries. However, subsequent studies had found that the DBT transfers had left out a substantial portion of the poor who were eligible for the government’s welfare schemes but lacked a Jan Dhan bank account. These included vulnerable sections of the population such as transgenders. This year, these same questions arose over the reach of the government’s fiscal support to the needy, as the second wave of Covid-19 ravaged the country between April-June. With e-RUPI, DBTs have been further simplified as the beneficiary will not need a bank account to receive cash assistance from the government.

e-RUPI can be used for providing drugs and nutritional support under Mother and Child welfare schemes, TB eradication programmes, drugs & diagnostics under schemes like Ayushman Bharat Pradhan Mantri Jan Arogya Yojana, fertiliser subsidies, etc. Even the private sector can use e-RUPI for its employee welfare initiatives or corporate social responsibility (CSR) obligations.

e-RUPI also comes when the RBI has talked about piloting its Central Bank Digital Currency (CBDC). CBDCs are a digital form of the country’s fiat currency, in this case, the rupee. Experts had imagined cash subsidies as one of the possible use-cases of CBDC in India. Now with e-RUPI, that requirement appears to have been addressed, even before more details about India’s CBDC are out in the public domain.

Notably, like e-RUPI, China’s version of CBDC or the Digital Yuan doesn’t require an internet connection. 

As mentioned above, prepaid vouchers for welfare assistance aren’t a new concept. The US helps the homeless with food stamps and also has education and school vouchers. Indian government agencies could now use e-RUPI to target the poor, those without a bank account, with subsidies on LPG and ration.