I refer to the article “Here is how the Currency Shortage can vanish in a jiffy with “Digi-Real Currency” in which a solution to meet the current crisis of shortage of currency notes was discussed.
One of the amendments that RBI has announced on the Prepaid Cards appears to make the suggestion even more viable than what had been earlier.
In my earlier suggestion, I had preferred that the “Digi-Real Notes” which are paper instruments issued as “Zero Value” and with monetary value loadable by transfer of money to a digital account mapped to the instrument, be issued by Banks using their current infrastructure for printing cheque leaves. One of the reasons for this was to provide a sense of respectability to the paper notes which will obviously look less valuable than currency notes.
Now RBI has issued an amendment to its master circular on Prepaid cards vide its circular dated 27th December 2016 which appears relevant to our discussions.
According to the circular, the para 7.9 of the master circular dated July 1, 2016 on Prepaid payment instruments has been amended.
The amendment is as follows:
i. Banks may extend the provisions of paragraph 7.9 of Master Circular on PPIs dated July 01, 2016 to include other entities / ‘employers’ such as unlisted corporates / partnership firms / sole proprietorship / public organizations like municipal corporations, urban local bodies, etc. (employers) for onward issuance to their staff / employees / contract workers, etc.
ii. Banks shall extend this facility only to those entities / ‘employers’ that have a bank account with them and after obtaining an undertaking that they are not availing of this facility from any other bank.
iii. Verification of the identity of the staff / employees / contract workers, etc. shall be the responsibility of the concerned ‘employer’. The bank should put in place proper systems to capture and maintain details of the employees to whom the cards are issued by the ‘employer’ along with copies of photograph and identity proof of such employees. The ‘employer’ is also required to make available details of bank accounts (if any) of the employees to the bank.
iv. Banks shall load/reload PPIs after obtaining necessary authorisation and above mentioned details of the employees/staff/contract workers, etc. from the ‘employers’.
v. Extant instructions of paragraph 7.9 (d), (e), (f) and (g) continue to be applicable.
The above changes shall come into effect from the date of this circular.
With this amendment it is now possible for a number of Companies including unlisted companies and even the proprietary concerns to issue “Prepaid Cards” co-branded with their Banks by identifying their employees. It will be as simple like issuing identity cards. Once issued, the participating Bank can allow loading of money into the prepaid card.
As a result of this amendment, the burden of issuing KYC based prepaid cards by Banks will be delegated to a number of employers.
The “Digi-Real Notes ” as suggested is also a similar instrument (though it is not a card) and may be termed as a “One time use prepaid instrument” that is actually handed over by the transferor to the transferee. Now such instruments can be issued not only by Banks but also by other agencies.
However for the instrument to be widely accepted, the issuing company needs to have some respectability and the look and feel of the instrument has project a sense of confidence.
This circular will enable many Companies to issue such prepaid instruments/cards to their employees and relieve the problem of currency shortage.
We may however reiterate that if the Companies only issue “Cards” as per the circular, the holders will only be able to use it as a “Digital payment” under say RuPay network. The card remains with the employee and can be used for payment to merchants. It will not substitute currency.
But if the suggestion of the undersigned is accepted, the “Digi Real Notes” can be “One time use prepaid cards” that can be used as a substitute for currency of any denomination such as Rs 100 or Rs 500/- or Rs 1000/- and will completely eliminate the need for the actual currency. At a cost of issuing the plastic cards, employers need to issue “Coupons” with their logo with whatever security feature they can accommodate within their budget. Employees can also be given an option to either pick up the “Cards” or “Digi-Real Notes”. A small charge can also be made to cover the cost.
I hope companies will consider this suggestion now that the legal aspect has been cleared. Even if private sector fails to respond quickly, public sector companies may move in quickly and create the precedence that can be taken up by others. This should meet the salary day rush for cash coming up in the next three days.