Offline Digital Payments by RBI

By : Neha Dhyani

Updated : Mar 2, 2023, 16:01

The Offline Digital Payments by RBI is a recent decision taken by the Reserved Bank of India to promote innovative digital payment solutions without Internet access. RBI has prescribed an offline digital payment of up to 200 INR without enabling any active Internet connection. With that movement, central banks allow payment solution providers to ignore the secondary authentication elements, such as UPI pins.

The Processing Of Offline Digital Payments by RBI

Offline Digital Payments by RBI can be made accessible for digital channels using wallets, cards, and mobile devices. This came into action considering Central Banks process small amounts of digital payments without having an active internet connection, and ignoring the second authentication factor, such as a payment interface (UPI) button that has been unified by its payment solution provider.

This helps merchants to accept varied payment solutions, for example:

  • Unstructured Supplementary Service Data (USSD), which will have Unified Payments Interface (UPI) as its key
  • SIM overlays with Sim cards as its key, wherein payments can be processed without data plans.
  • Near-Field Communication (NFC).

Offline Digital Payments Consequences

After the inception of this service, the data from the National Payments Corp. of India stated that only in November and December, 110,000 and 100,000 USSD-based UPI transactions were done.

In November 2021 RBI, in collaboration with the Payments Council of India (PCI) organised a hackathon in which seven companies were chosen to resolve solutions to enable digital payment from offline modes. RBI has been looking for this opportunity for a long, where payments could be accessible using mobiles as 57% of phones in India are smartphones. The hurdle, however, was the second authentication required which was the UPI.

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How are Offline Digital Payments by RBI made possible?

Offline Digital Payments by RBI were approved and accessed using NFC solutions. NFC is the best option for offline payment. This solution involves a strategic device to read the card with a tap and pass it to a records management system or issuer to confirm the bill. A debit confirmation is sent, and it works, how a railcard works

For example, it's like how a subway card works. Payment of INR 200 may seem irrelevant in urban areas, but in rural areas, especially in small Kirana stores, this amount has a high commercial value. This is specifically beneficial for people who buy products from the public distribution system, where rice is valued at Rs. 2 per kg and wheat is Rs 3 per kg.

Offline Digital Payments by RBI - Key Facts

Payments can be made, as part of the offline mode, in the proximity mode, which is a face-to-face mode, and this can be performed using any channel or device, such as a card, wallet, or mobile device. These transactions do not require AFA - an additional factor of authentication and this transaction is added offline. The customer will receive an alert of the paid amount through an SMS or an email.

To conclude, the total limit prescribed by the RBI is Rs. 2000. The controller also mentioned offline trading payment equipment only after acquiring the customer’s explicit consent. The RBI also says that the buyer has to bear all liabilities of any sequence of technical or security issues regarding the transaction with dealers.

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FAQs on Offline Digital Payments

Q.1. How can Offline Digital Payments by RBI be made?

Offline payments can be processed with any merchant, platform, or device using a wallet, card, or mobile device. Offline Digital Payments by RBI are performed only in the face-to-face or proximity mode and these payments will be processed without AFA.

Q.2. How will Offline Digital Payments by RBI be covered compliantly?

Digital Offline payments will be processed without using the internet and there will be no need to switch the contactless transaction mode on. RBI also specified that offline payment was covered by its limited customer liability provisions and in case of any technical or security issues at the time of making the transaction are faced, the acquirer or the buyer will be held responsible.

Q.3. With regards to Offline Digital Payments by RBI, who will maintain supervision and compliance regarding offline payments?

RBI has given the responsibility of maintaining strict monitoring, supervision, and compliance of Offline Digital Payments by RBI to payment system participants (PSPs), banks and non-banks, all issuers, and the authorised payment system operators (PSOs).

Q.4. What is the lower and upper limit of Offline Digital Payments by RBI?

The RBI has issued a framework and a set of regulations to facilitate offline payments which are small-value digital payments that can be easily made using cards, wallets, mobile devices, and more. This was done to facilitate digital transactions in rural and suburban areas. The limit for Offline Digital Payments by RBI transactions is set at 200 rupees, with a total limit of 2,000 rupees at any time. This framework enables authorised structures to handle low-cost offline digital payments.

Q.5. When were the Offline Digital Payments by RBI first tested?

The pilot tests that triggered Offline Digital Payments by RBI were conducted between September 2020 till July 2021 by some institutions. In October 2021, RBI announced a framework for implementing low-value digital payments in offline mode nationwide.