RBI plans lightweight payments system for emergency situations: All you need to know

Acknowledging the potential vulnerabilities of current payment systems like RTGS, NEFT, and UPI during catastrophic events that may disrupt communication infrastructure, the Reserve Bank of India (RBI) has taken note.

As a proactive measure, the RBI has developed a concept for a lightweight and portable payment system that can function independently of conventional technologies. This innovative system aims to facilitate uninterrupted transactions, even in extreme situations.

The RBI stated that traditional payment systems heavily depend on intricate wired networks and sophisticated IT infrastructure to manage substantial transaction volumes and ensure continuous availability. However, in cases of natural disasters or conflicts, these systems can experience temporary unavailability due to disruptions in communication and information infrastructure.

In order to address this potential risk, the RBI has devised a lightweight payment system that is specifically designed to exhibit resilience during such challenging circumstances.

The central bank emphasised the importance of being prepared to handle extreme and unpredictable situations. With this objective in mind, the RBI has conceptualised a portable and lightweight payment system that operates independently of conventional technologies. This system can be operated from any location with a minimal staff, as outlined in the RBI’s Annual Report for the year 2022-23.

The envisioned system is anticipated to function using simplified hardware and software, allowing it to be deployed from any location with a minimal workforce.

This system will be activated selectively, being put into operation when necessary. Its primary focus will be processing crucial transactions that play a vital role in maintaining the stability of the economy. This includes government transactions as well as transactions related to the market.

With this approach, the lightweight system seeks to achieve an almost negligible downtime in the payment and settlement system of the nation.

The lightweight payment system’s capacity to ensure continuous operations of vital payment services, including bulk payments, interbank payments, and cash provisioning to participant institutions, will contribute to maintaining the liquidity flow within the economy, even in extreme circumstances.

By providing a robust solution, the lightweight payment system serves as an equivalent of a secure bunker for payment systems. This enhances public trust in digital payments and strengthens the resilience of the financial market infrastructure.

According to the RBI, the introduction of a lightweight and portable payment system has the potential to significantly reduce downtime in the country’s payment and settlement system. This system can play a crucial role in maintaining the liquidity pipeline of the economy by enabling continuous operation of essential payment services such as bulk payments, interbank payments, and cash provision to participant institutions. By ensuring uninterrupted functionality, this system aims to keep the economy’s liquidity flow intact and operational.

The presence of a resilient system of this nature can be likened to a secure bunker within payment systems, ultimately bolstering public trust in digital payments and the overall financial market infrastructure, even in the face of extreme circumstances.