On July 22, 2020, the Reserve Bank of India (RBI) publicized the “Report of the Committee for Analysis of QR (Quick Response) Code” under the chairmanship of Prof. Deepak B. Phatak on its website for comments / suggestions of various industry players currently involved in or associated with the use of QR codes before August 10, 2020. The report has recommended making QR codes more interoperable. QR code is used to pay utility bills, fuel, grocery, food, travel, and several other categories.
Before heading towards the recommendations of the report let’s have a look at QR in Indian scenario.
Usage of QR in India:
In India, the factors of post demonetization, increased penetration of smartphones and high-speed internet connectivity led to the increased adoption of QR codes for digital payments. There are three different types of QR Codes in India viz.
- Bharat QR– It is the world’s first fully interoperable QR code payment system. Its specifications have been jointly developed by RuPay, Visa, MasterCard, and Amex.
- Unified Payments Interface (UPI) QR– It was launched by the National Payments Corporation of India (NPCI) in August 2016.
- Proprietary QR (Closed loop) – It is provided by RBI authorized companies as Prepaid Payment Instruments (PPI).
For Knowledge: Closed loop mobile payments are those that enable consumers to load money into a spending account that is linked to a payment device while open platforms are connected to a personal account. For example credit card which doesn’t require a prepaid amount to exist in the system that needs to be topped up when the money runs out.
Key recommendations of Report:
-The committee has recommended phasing out of proprietary, closed loop QR codes as it requires customers to manage separate apps and is creating hindrance in this payment system. Instead RBI must encourage the use of interoperable QR codes such as the Bharat QR and UPI QR to enable faster on-boarding of all types of merchants for digital payments.
-Government / RBI should allow a controlled interchange instead of zero Merchant Discount Rate (MDR) on QR code / UPI / RuPay Debit card transactions,
-Tax incentives should be provided to merchants who accept payments through electronic mode.
-For consumers also, the government should provide incentive schemes to ensure popularity of QR code transactions.
-All bank and non-bank applications must go through a process of standardisation to offer seamless experience to customers.
-Small value merchants may be allowed to access the Bharat QR ecosystem to allow them more payments acceptance options.
-Non-banks and fintechs could be allowed to participate in the Bharat QR ecosystem to increase penetration.
The Committee was constituted by RBI on December 23, 2019 under the Chairmanship of Prof. D.B. Phatak (Professor Emeritus, IIT-Bombay) to review the prevalent system of QR Codes in India for facilitating digital payments and submit recommendations. Its members were:
- Arvind Kumar – Director General (DG), Standardisation Testing and Quality Certification (STQC), Ministry of Electronics and Information Technology
- Sunil Mehta– Chief Executive, Indian Banks’ Association (IBA)
- AS Ramasastri– Director, Institute for Development of Research in Banking Technology
- Dilip Asbe– Managing Director and Chief Executive Officer (CEO), National Payments Corporation of India (NPCI)
- Vishwas Patel– Chairman, Payments Council of India (PCI)
About Reserve Bank of India (RBI):
Headquarters– Mumbai, Maharashtra
Formation– 1 April 1935
Governor– Shaktikanta Das
Deputy Governors– 4 (Bibhu Prasad Kanungo, Mahesh Kumar Jain, Michael Debabrata Patra, one is yet to be appointed).
Recent Related News:
On June 13, 2020, RBI made some changes to the monitoring structure of Financial Markets Infrastructure (FMI) and Retail Payment Systems (RPSs) with the aim to ensure the security and stability of the payment structure. The new framework treats NPCI (National Payments Corporation of India) and National Electronic Fund Transfer (NEFT) as FMIs.