Lightweight Payment And Settlement System : RBI
The Reserve Bank of India (RBI) recently announced plans to introduce a ‘Lightweight’ Payment and Settlement System (LPSS) for emergencies which was proposed in RBI’s annual report for 2022-23.
- The lightweight system aims to provide resilience and continuity of payment and settlement systems while ensuring efficiency during emergencies.
- LPSS is independent of conventional technologies and wired networks that underlie existing payment systems such as UPI, NEFT, and RTGS.
- As a part of the ‘Utkarsh 2.0’ initiative, RBI will put in place a resilient framework for oversight of Centralized Payment Systems — NEFT and RTGS.
- It will also look to upgrade the RTGS system, including improvements to the existing ones and the introduction of new functionalities.
- LPSS for emergencies ensures resilience and continuity of payment and settlement systems during extreme and volatile situations.
- Conventional payment systems like UPI, NEFT, and RTGS are vulnerable to disruptions caused by natural calamities or war due to their dependence on complex wired networks and advanced IT infrastructure.
- Disruptions in existing systems can affect liquidity pipeline and hamper essential payment services.
- Lightweight system provides a portable and easily activated solution that can be operated remotely with minimal resources.
- It serves as a backup option for critical transactions, maintaining stability and ensuring the availability of essential payment services.
- The system will have a bare minimum of trained staff who will handle payment and settlement operations securely and efficiently.
- They will also coordinate with government agencies, financial institutions, market participants, and service providers.
- The system will process only those transactions that are crucial for maintaining the stability of the economy, such as government and market-related transactions.
- Retail or individual transactions that can be deferred or conducted through alternative modes will not be handled.
- The system will employ a simplified mechanism to ensure the integrity and validity of transactions.
- It will also maintain transaction records for reconciliation and audit purposes.