Union Budget 2023: With Budget 2023 around the corner and the pilot project on central bank digital currency going on, people are expecting some major initiatives in digital banking to be introduced by the government this year. While on one hand, the volume of UPI transactions has gone up by more than 1.5 times between January and December’22, the government is still aiming for more penetration of UPI usage.

In an exclusive interaction with Zee Business, Ramesh Lakshminarayanan, Chief Information Officer (CIO), talks about what kind of progress can we expect in UPI use and digital banking in the coming years.

What are your expectations from the Budget 2023 in terms of digital banking and UPI?

UPI is very foundational to the industry. The government will obviously be more focused on facilitating the usage. The penetration of UPI will further increase from here onwards. There have been several initiatives like e-Rupi, cross border UPI transactions and UPI lite was a great invention too. UPI credit cards could be a game changer as well, where customers can use the credit cards on a QR code.

As the government is enhancing digitization efforts, UPI will continue to play a very important role. Banks will be working on the stacks to enhance their UPI product too. The intervention of the government might be there to increase digital banking penetration even further. Cross-border UPI as well as the e -Rupi transactions may be promoted. UPI is not just a payment mode anymore, it has become a digital ecosystem.

How will the e-Rupi contribute to the digital banking programme? How will the government contribute to the better adoption of the e-Rupi once it is launched fully?

E-rupi will let the customers control the end-users. For e-Rupi, the users could ensure that the QR code works for some specific users or merchants. In e-Rupi, a reverse technology is used, where the merchant needs to scan the code and customers could generate the code for a particular end use. Thus, when one needs to do end-user tracking, e-Rupi can help. The usage will be enhanced for both the private sector and the government sector. The infrastructure will be such that more and more government schemes will incorporate the use of e-Rupi.

How will e-Rupi and UPI go hand-in-hand?

UPI and e-Rupi or CBDC complement each other. The use of CBDC will be more in terms of offline payment. When someone is traveling on a flight, UPI can’t be used, then CBDC will help. Both UPI and CBDC need to work simultaneously to ensure that users have multiple payment channels and that they are not dependent on a particular monolithic entity.

Will the government introduce transaction fees for UPI users? If not, how can the UPI model be monetized?

The focus of the government right now is to keep the adoption of UPI going and incorporate more users into the ecosystem. Banks also need to figure out ways to monetize UPI. They may figure out ways to use UPI for smaller credit tickets. But the government and the regulators need to figure out how they want to look at merchant discount rates, or MDR for UPI uses.

One of the ways to monetize UPI apart from small ticket loan disbursement could be the collection of the same during repayment. Collection of money can be done using UPI. Monetization is not only about generating revenue but also cutting down costs on the other side. UPI can contribute to small credit programmes and bring efficiency to the collection process. As UPI goes deeper and deeper, more aspects of revenue generation through digital banking can be explored. Some banks have actually started to allow small loans to be disbursed through UPI.  

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