Central Idea

The Reserve Bank of India (RBI) has proposed the development of a Light weight and Portable Payment System (LPSS).

Light weight and Portable Payment System (LPSS)

LPSS is referred to as a “bunker” equivalent, to ensure uninterrupted digital payments during exigencies such as natural calamities or war.
This system will operate independently of existing payment technologies like UPI, NEFT, and RTGS.
It can be operated from anywhere by a minimal staff during exigencies.
It will process critical transactions, such as bulk payments and interbank payments, during extreme and volatile situations.
The system operates on minimalistic hardware and software and is activated only when needed.

As part of the Utkarsh 2.0 initiative, the RBI is working on strengthening the oversight framework for Centralised Payment Systems, including NEFT and RTGS.
The initiative aims to enhance the existing payment systems and introduce new functionalities to improve efficiency and reliability.

Near-zero downtime: The RBI aims to create a payment system that can operate on minimalistic hardware and software, ensuring near-zero downtime of the payment and settlement system in the country.
Continuous liquidity pipeline: The lightweight system will facilitate uninterrupted functioning of essential payment services like bulk payments, interbank payments, and provision of cash to participant institutions, thereby keeping the liquidity pipeline of the economy alive and intact.
Stability of the economy: It is expected to process critical transactions, including government and market-related transactions that are crucial for maintaining the stability of the economy.
Enhancing public confidence: The resilient nature of the system will act as a bunker equivalent in payment systems, enhancing public confidence in digital payments and financial market infrastructure, even during extreme conditions.

Existing payment systems: The RBI acknowledges the availability of various payment systems in India for individuals and institutions, each with its distinct character and application.
Handling large transaction volumes: Conventional systems like RTGS, NEFT, and UPI are designed to handle large volumes of transactions while ensuring sustained availability, relying on complex wired networks and advanced IT infrastructure.
Vulnerability to catastrophic events: However, catastrophic events such as natural calamities and war can temporarily render these payment systems unavailable by disrupting the underlying information and communication infrastructure.
Preparedness for extreme situations: To address this vulnerability, the RBI believes it is prudent to be prepared with a lightweight payment system capable of functioning in extreme and volatile situations.

The RBI has not provided a specific timeline for the launch of the lightweight payment and settlements system.
However, the concept serves as a crucial step towards ensuring the resilience of the payment ecosystem during emergencies.
Further research and development efforts are necessary to bring this system to fruition and enhance the overall stability and confidence in digital payments in India.