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Operationalisation of Payments Infrastructure Development Fund (PIDF) Scheme

Operationalisation of Payments Infrastructure Development Fund (PIDF) Scheme

Recently the Reserve Bank of India announced the operationalisation of the Payments Infrastructure Development Fund scheme. An advisory council under the chairmanship of the deputy governor of RBI BP Kanungo has been constituted for managing this scheme. Let’s know more about it. 

What is the objective of Operationalisation of Payments Infrastructure Development Fund (PIDF) scheme?

 The objective is to subsidise deployment of payment acceptance infrastructure in Tier 3 to 6 centres with special focus upon the northeast states of the country. It aims to create 30 lakh new touch points every year for digital payments. It aims to increase payments infrastructure by adding 10 lakh physical and 20 lakh digital payment acceptance devices every year.

What is the validity period of the fund?

The fund shall be operational for a period of three years starting from 1st January, 2021 and it can be extended for a period of two years, if needed.

Operationalisation of Payments Infrastructure Development Fund: Funds Allocated

The PIDF currently has a corpus of 345 crore rupees and the Reserve Bank shall contribute 250 crore rupees to the corpus. 95 crore rupees shall be contributed by the major authorized card networks in the country. In all they would contribute 100 crore rupees. The card issuing banks will also contribute based on the card issuance volume to the corpus covering both debit and credit cards, at a rate of 1 rupees and 3 rupees per debit and credit card issued by them, respectively.

The endeavour shall be to collect the same by the end of this month that is 31st January, 2021. In case of any new entrant to the eco-system of card payment, shall contribute to the PIDF an appropriate amount.

Implementation of the PIDF Scheme

The RBI has notified the following points with respect to its implementation:

  • The focus will be target those merchants that are still to be terminalised (merchants not having any payment acceptance device).
  • Merchants that are engaged in the services such as transport and hospitality, fuel pumps, public distribution system shops, government payments, healthcare and kirana shops can be included, in the targeted geographies. 
  • It is to be noted that the fund shall be used to subsidize banks and non-banks for deploying payment infrastructure that would be contingent upon specific targets that is achieved. 
  • The advisory council shall devise a transparent mechanism for allocating targets to acquiring banks and non-banks in various locations and segments.
  • The implementation of targets shall be under PIDF monitored by the Reserve Bank with assistance from card networks, from the Indian Banks Association and from the Payments Council of India.
  • Acquiring banks are financial institutions processing debit and credit card transactions on behalf of merchant or business.
  • Tentatively, Tier 3 and 4 centres shall be allocated 30% of the acceptance device whereas Tier-5 and 6 centres shall get 60% and the northeast states shall be provided 10%. 
  • Multiple payments acceptance devices and infrastructure supporting underlying card payments like physical point of Sale, mobile point of sale, Public Switched Telephone Number, general Packet radio Service and QR based payments shall be funded under the scheme.

How the Payments Infrastructure Development Fund is expected to benefit the digital payments ecosystem of the country?

If you can remember, in the year 2019 the government had come up with an announcement declaring that all RuPay debit cards and UPI interchange fees shall be zero. It meant that whatever banks earned from every single digital transaction become nil. It created a massive uproar and payment operators and banks stated that if there is no money from payments, then they would have no incentive to expand the digital payments network. Later expansion of payments infrastructure continued to happen in big cities. Rural and northeast parts of India continued with cash. To address the issue of deployment, Reserve bank came up with an idea of creating a fund dedicated to subsidise deploying terminals cost in far off regions.

Towards the end of the year 2019, RBI announced the creation of acceptance development fund. It would subsidize cost that banks incurred while deploying card payments infrastructure and solve the issue of cost faced by them.

Operationalisation of Payments Infrastructure Development Fund (PIDF) scheme: Breakup of subsidy and fixing accountability

It may be noted that a subsidy of 30% to 50% of the cost of physical Point of sale and 50% to 75% subsidy for digital Point of sale will be offered. The subsidy shall be granted on half-yearly basis. It will be granted after ensuring that performance parameters is achieved including conditions for active status of the acceptance device and criteria of minimum usage, as defined. Acquirers of the subsidy are required to submit quarterly reports on the achievement of targets to the Reserve Bank.

What would be the governance structure of the PIDF as notified by the RBI?

It is to be noted that the Payments Infrastructure Development Fund will be governed by an ex-officio Advisory Council. As expressed at the beginning of this article, an advisory council under the chairmanship of deputy governor of RBI BP Kanungo has been constituted. The Chief General Manager, Department of payments and settlement systems, RBI will function as the Secretariat to the Advisory Council.

The advisory council shall constitute sub-committees to look into various aspects of the PIDF, as required. The advisory council may co-opt members at its discretion and the council shall devise suitable rules for the operation of the PIDF.

Operationalisation of Payments Infrastructure Development Fund (PIDF) scheme: Other related steps

The setting up of this scheme is in line with the measures proposed by the vision document on the payment and settlement systems in India (2019-21).

The RBI has constructed a composite DPI (Digital Payment Index) with a view to capture the extent of digitalization of payments in the country.


The Payments Infrastructure Development Fund is expected to encourage the deployment of more digital payments infrastructure. Clearly, the government and the regulator is keen to digitize the economy of this country. You may refer to the RBI notification[1] attached with this article for more information.

Read our article:RBI notification against unauthorized Digital Lending Platforms/Mobile Apps


Ashish M. Shaji

Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on corporate law. He is a creative thinker and has a great interest in exploring legal subjects.

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