RBI has introduced the LPSS, a payment system designed to function autonomously, without relying on traditional technologies.
The Reserve Bank of India (RBI) has conceptualised a lightweight and portable payment system to ensure the uninterrupted functioning of payment systems during emergencies like natural disasters or war. This system is specifically designed to facilitate crucial transactions and sustain the liquidity flow in the economy.
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As per the central bank, the envisioned Light Weight and Portable Payment System (LPSS) will function autonomously, separate from conventional technologies, and can be managed with minimal staff from anywhere.
In the past, payment systems such as RTGS, NEFT, and UPI have heavily relied on intricate wired networks and advanced IT infrastructure to effectively process high transaction volumes and maintain uninterrupted availability. However, these systems face vulnerabilities during natural disasters or times of conflict, which can disrupt their operations and pose a substantial threat to the overall stability of the economy, RBI disclosed in its latest annual report.
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Therefore, it is advised to be prepared to confront such extreme and unpredictable circumstances.
To achieve this objective, the RBI has introduced the LPSS, a payment system designed to function autonomously, without relying on traditional technologies.
The RBI anticipates that the LPSS will operate with minimal hardware and software, and it will only be activated when required. The system is designed to handle transactions that are crucial for maintaining the stability of the economy, such as government and market-related transactions.
The central bank emphasized that implementing such a system would significantly reduce downtime in the payment and settlement system of the country. This system would also play a vital role in maintaining the liquidity flow in the economy by enabling the uninterrupted operation of critical payment services such as bulk payments, interbank payments, and the provision of cash to participant institutions.
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“The new system will function within the payment system similar to the way a bunker operates during times of war. This enhanced resilience is anticipated to bolster public confidence in digital payments and strengthen the overall financial market infrastructure, even in the most challenging situation”, RBI said.
In the fiscal year 2022-23, the payment and settlement systems witnessed significant growth with a transaction volume increase of 57.8%, on top of the expansion of 63.8 percent as compared to the previous year.
During 2022-23, the proportion of digital transactions in the overall volume of non-cash retail payments rose to 99.6%, demonstrating a slight increase from the previous year’s figure of 99.3%.
