Government payments play a critical role in the development of a national payment system especially in developing economies. Government payments can facilitate economic growth and trigger innovation in the underlying payment system infrastructure while enhancing public policy goals such as efficiency, transparency, security of payments as well as financial inclusion.
The Economist Intelligence Unit in its 2018 Government e-Payments Adoption Ranking had ranked India 28th amongst 75 countries and termed India's performance as "Intermediate". Aadhaar biometric identity system, introduced in the year 2009 has been a major facilitator in electronification of Government payments. With approximately 137 crore Indians enrolled in Aadhaar, it is recognised as the world's largest biometric identity system. By linking welfare and other transfers to the unique 12-digit ID numbers tagged to biometric markers, Aadhaar, as claimed by the government, has helped reduce leakage (for example through graft by middlemen) and also helped in identifying fake beneficiaries.
APBS, a component of National Automated Clearing House (NACH), which uses Aadhaar number for electronic crediting of government subsidies and benefits in Aadhaar-linked bank account, was implemented in 2012. Aadhaar mapper, a repository of Aadhaar numbers managed by National Payments Corporation of India (NPCI), is used for routing the APBS transactions to the destination banks based on the unique IIN (Institution Identification Number) of destination bank. The bank, in turn, credits the amount to the desired account number based on the Aadhaar number of the beneficiary.
The system has led to electronification of large number of government payment transactions which were predominantly done either in cash or cheque. Besides transferring the benefits and subsidies under DBT schemes, it also serves the goal of financial inclusion.
Government's social security schemes like pension, subsidies, income support, etc., require bulk processing of payment instructions in an efficient and scalable manner. For efficient transmission of objective, the payment systems should be capable of end-to-end automatic processing of payment instructions without manual intervention, thereby ensuring direct benefit transfer to the intended beneficiary. Hence efficient payment systems bring overall transparency and public trust to these schemes.
NACH platform operated by NPCI serves this purpose. National Automated Clearing House (NACH) platform is used by banks, financial institutions, corporate and government departments for handling high volume and low value credit / debit transactions which are generally repetitive in nature. As on November 30, 2020, 1315 banks are the direct members of NACH, while there are also several other banks which participate in NACH system through sub-membership model. NACH provides options to member banks for routing their credit (ACH credit) / debit (ACH debit) transactions using IFSC / MICR Code / IIN codes etc. Many social schemes such as Pradhan Mantri Kisan Samman Nidhi (PMKISAN), The Pradhan Mantri Shram Yogi Maandhan Yojana (PMSYMY), Pradhan Mantri Laghu Vyapari Maan-dhan Yojana (PMLVMY) and Pradhan Mantri Kisan Maandhan Yojana (PMKMY), etc., were rolled out using NACH platform.
National Electronic Toll Collection (NETC) program has been developed to meet the electronic tolling requirements of the Indian market as it offers an interoperable nationwide toll payment solution including clearing house services for settlement and dispute management.
NETC system enables the customer to make electronic payments at NETC-enabled toll plazas on the highway without stopping at the toll, using Radio Frequency Identification technology.
FASTag is an electronic toll collection system in India. It employs Radio Frequency Identification (RFID) technology for making toll payments directly from the prepaid or savings account linked to it while the vehicle is in motion. FASTag (RFID Tag) is affixed on the windscreen of the vehicle and enables to drive through toll plazas without stopping for transactions. The program is live on toll plazas across the country.
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Source : RBI
Last Modified : 6/8/2023
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