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The wallet-like instrument can be ‘recharged/replenished’ when consumers are online and its upper limit is INR 2,000

The payments can be made without an additional factor of authentication i.e. without the need for OTPs

The move is aimed to increase the adoption and boost the success rate of low-value UPI transactions that otherwise utilise banks’ network bandwidth

The Reserve Bank of India (RBI) has issued a framework to enable small value digital payments in offline mode. Users will now be able to make small transactions (within INR 200) offline (without the use of internet or telecom connectivity) using channels or instruments such as cards, wallets and mobile devices.

A prominent feature of the new offline-first payment mechanism includes a wallet-like instrument that consumers can ‘recharge/replenish’ when they are online. The upper limit of the wallet is INR 2,000.

The regulator has stated that payment instruments will be enabled for offline transactions based on the explicit consent of the customer. The payments can be made without an ‘Additional Factor of Authentication (AFA)’ i.e. without the need for OTPs.

Moreover, banks, payment gateways and payment apps are not liable to send alerts on a real-time basis, rather they can send an aggregated statement. “However, details of each transaction shall be adequately conveyed,” RBI said in the framework.

In case of failure of transactions, even on the merchant’s point, the banks shall be held liable, it said.

The Need For Small Value Payments In Offline Mode

RBI has previously maintained that 50% of the transactions through UPI were below INR 200. While the use of UPI for low-value transactions signifies that the real-time payments’ service is quite the go-to digital feature for Indians, it consumes significant system capacity and bank resources. It also leads to customer inconvenience due to transaction failures because of issues related to connectivity.

In a bid to ease the process of small value transactions, RBI had piloted a simpler process for these transactions between September 2020 and July 2021. Through an ‘on-device’ wallet in the UPI app, the apex bank proposed to increase the adoption and boost the success rate of low-value UPI transactions that otherwise utilise network bandwidth.

That is, it aimed to conserve banks’ system resources, without any change in the transaction experience for the user — quite similar to a wallet system that Paytm, Amazon Pay and PhonePe offer — but in an offline setup.

Not only that, in a bid to widen the reach of digital payments in the country, the RBI has further proposed to introduce UPI for feature phone users. It observed that around 74 Cr mobile phone users have smartphones in the country out of the total 118 mobile users. Thus, it aims to bring a significant number of feature phone users in the country under the digital payments’ ambit.