e-RUPI digital payments: Meaning, how does it work? Is it safe?

Every year, the Government spends lakhs of crores of rupees under its welfare schemes to distribute benefits to crores of beneficiaries. However, the distribution suffers from leakages, though some progress has been made in addressing the leakages through JAM and DBT. The e-RUPI payment solution is yet another step in this direction to make the public distribution system further leakproof.

e-RUPI digital payment: How the voucher-based digital payment solution will work? Banks issuing e-RUPI vouchers

The Central and State Governments run many welfare schemes through which they pass on certain benefits to the intended beneficiaries. However, there are some challenges that the Government faces in implementing these welfare schemes.

  • The Government is often unable to identify the right beneficiaries
  • Certain benefits don’t reach the right beneficiaries as the middlemen take away these benefits using illegitimate means
  • In some cases, the beneficiaries don’t have bank accounts to get the benefits transferred to their accounts
  • Even if the money reaches the beneficiary’s bank account, the Government may not be able to ensure that the money is used for the intended purpose, and is not redirected for some other use. 

With the JAM (Jan Dhan bank account, Aadhaar, Mobile) trinity and direct benefit transfer (DBT) mechanism, the Government was able to solve the first two challenges. However, even with JAM and DBT, the third and fourth challenges remain. To address these challenges, the Government has introduced e-RUPI.

What is e-RUPI?

e-RUPI is a voucher-based digital payment solution. Under this system, the Government will send e-vouchers to beneficiaries of welfare schemes. For example, let’s assume a beneficiary receives a vaccination benefit voucher. In this case, the benefit can be availed of only by the specified beneficiary, and only for the purpose of getting vaccinated at a healthcare centre/hospital. 

So, e-RUPI is a voucher-based person- and purpose-specific digital payment solution. It aims at making sure the benefits reach the intended beneficiaries in a targeted and leakproof way. The issuer can track the usage of the voucher, ensuring the money has been spent for the intended purpose.

Related: How digital payment methods are changing the face of the Indian economy

How will the e-RUPI system deliver vouchers to beneficiaries?

The Government will send e-vouchers to the intended beneficiary’s mobile in a cashless and contactless manner, in the form of either a QR-code or SMS. Many still don’t have smartphones, so an SMS would be the best way to deliver e-vouchers to such people. So, those staying in rural or remote areas will also be able to avail of voucher benefits.

Beneficiaries can visit the service provider and avail of the benefit. The voucher redemption does not require one to have a bank account, card, digital payment app, internet banking access, etc. It will be a one-time use voucher that is preloaded with a fixed amount.

The service provider will get the payment only after the intended beneficiary has redeemed the voucher. So, the system will make sure the benefit has reached the right beneficiary and has been availed of.

Elimination of intermediaries

Through the e-RUPI system, the Government will be able to deliver the voucher directly to the intended beneficiary’s mobile. This eliminates intermediaries (except voucher issuing banks) while delivering the benefits. The intended beneficiary can visit the service provider directly and avail of the benefit. 

Role of issuing entities

The e-RUPI payment solution has been launched by the National Payments Corporation of India (NPCI) along with some other Government bodies (Department of Financial Services, Ministry of Health & Family Welfare, and National Health Authority) and partner banks. 

The partner banks will work as voucher issuing entities. The Government entities running welfare schemes will have to approach the issuing entities with the list of beneficiaries, details of vouchers to be issued, and other information. The issuing entity will generate the vouchers and send them to the intended beneficiaries.

Related: RBI gives digital payment apps a boost: ATM cash withdrawals and NEFT/RTGS allowed

Banks enrolled as issuing entities

  • Axis Bank
  • Bank of Baroda
  • Canara Bank
  • HDFC Bank
  • ICICI Bank
  • IndusInd Bank
  • Indian Bank
  • Kotak Bank
  • Punjab National Bank
  • State Bank of India
  • Union Bank of India

Welfare schemes currently identified for e-RUPI

Listed blow are some of the welfare schemes currently identified by the Government for issuing vouchers using the e-RUPI payment solution system:

  • Mother and child welfare schemes for providing drugs and nutritional support
  • Tuberculosis (TB) eradication schemes
  • Ayushman Bharat insurance scheme for providing drugs and diagnostics
  • Fertilizer subsidies

Is the e-RUPI system safe?

At the time of voucher redemption, the beneficiary doesn’t need to reveal any personal or confidential information. The system is safe and secure, and the beneficiary’s privacy is taken care of. However, e-RUPI should not be mistaken as a cryptocurrency. e-RUPI vouchers are backed by the Indian rupee as an underlying asset.

Extension of e-RUPI to corporates

The Government has allowed corporates to use the e-RUPI payment solution to deliver vouchers to their employees for various purposes like healthcare, etc.

Challenges with the e-RUPI system

The e-RUPI system is dependent on mobiles for delivering the benefits to the beneficiaries. In India, presently, around 80% of the population has mobiles. So, the Government will have to think of other ways to reach the remaining 20% for delivering welfare scheme benefits.

e-RUPI – a step in the right direction

Prime Minister Narendra Modi launched the e-RUPI digital payment system on 2 August 2021. With this system, the Government intends to strengthen its public distribution system further and plug the loopholes. 

The introduction of the e-RUPI system is a step in the right direction. It will ensure that the Government is able to deliver the benefits of its welfare schemes to the intended beneficiaries in a targeted and leakproof manner, with limited touchpoints between the Government and the beneficiary. 

The concept of the e-RUPI electronic voucher takes forward this vision of good governance. What’s more, the system is safe and secure, and aims to improve the living standards of common Indian citizens.


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