Explained: What e-RUPI launched by PM Modi may have in store for MSMEs to boost digital transactions

In FY21, over Rs 5.52 lakh crore in DBT was transferred across 603 crore transactions.

Technology for MSMEs: e-RUPI — a one-time cashless and contactless payment mechanism — launched by Prime Minister Narendra Modi to strengthen the Direct Benefit Transfer (DBT) scheme has the potential to boost digital transactions among micro, small, and medium enterprises (MSMEs) as well, according to experts Financial Express spoke with. e-RUPI, which has been launched to enable “person and purpose-specific” transfer of money under DBT schemes of the Ministry of Health, to begin with, will essentially help the government or an organisation with amount transfer to the beneficiary’s mobile phone (including feature phones) through a QR code or an SMS for only a particular purpose, for instance, vaccination of employees, instead of his/her bank account. Merchants would be able to accept the code or SMS without any app or card intervention or even internet banking through e-RUPI developed by the National Payments Corporation of India (NPCI).

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Use cases for e-RUPI would expand to other DBT schemes ahead, as informed by PM Modi during its launch on Tuesday. This may allow MSMEs as well to send money to beneficiaries including employees and non-employees to ensure it is used for the required purpose, for instance, skill development courses and social welfare measures as well.

“Cashless and contactless transactions will definitely help MSMEs. This is a powerful way of increasing the e-relevance for MSMEs. By making cashless payments locally and nationally, e-RUPI will be a symbol of progress to reduce payment friction. The task ahead is to make this segment aware of the possibilities of this very timely approach, especially after Covid,” Shashank Tripathi, Partner, PwC India told Financial Express Online.

The initiative is also aimed at ensuring that money reaches the intended beneficiary. According to the government, there are 314 DBT schemes from 54 ministries, as per the data from the DBTBharat portal. In FY21, over Rs 5.52 lakh crore was transferred across 603 crore transactions. In FY22 so far, Rs 1.28 crore has been transferred across 155 crore transactions.

“As e-RUPI does not require the beneficiary to have a bank account, a major distinguishing feature as compared to other digital payment forms, it will see higher adoption rate in rural and distant areas effectively that are currently a hub of small businesses. The government is depending on the e-RUPI platform to deliver welfare schemes for which MSME and small businesses are a major part,” Shams Tabrej, Founder, and CEO Ezeepay told Financial Express Online.

e-RUPI has a significant potential to support small businesses in taking direct benefit from a multitude of governments schemes as well. “For Example, under the Make in India initiative, financial assistance to MSMEs in ZED Certification (Zero Defect and Zero Effect practices) is being offered that can be passed on to them using this platform. Future applications are also huge. The digital voucher can potentially be utilized to manage the working capital gap of the MSMEs such as enabling them to make GST or Provident Fund or Employee State Insurance payments utilizing e-RUPI and hence, shortening the working capital cycle significantly,” Gaurav Anand, CEO & Co-Founder of B2B loan marketplace Namaste Credit told Financial Express Online.

Apart from fast-tracking digital payments, e-RUPI will also accelerate direct benefit disbursals at the last mile and help bring the unbanked and underbanked into the financial inclusion fold. “This is the true test of the network that has been created at the last mile because, at PayNearby, our merchants will be able to identify the user for the right benefit and deliver it in a specific manner. Targeted, transparent, and leakage-free delivery to the endpoint is the intention of policymakers, and we are happy that PayNearby will be able to enable this objective. It is designed to make digital payments simple, quick, and effective, and can be adopted by millions of MSMEs, who in turn, can handhold a tech-shy population towards a less-cash economy,” Anand Kumar Bajaj, Founder, MD & CEO, PayNearby told Financial Express Online.

PayNearby app allows retailers to offer digital financial services like Aadhaar ATM, BharatQR, bus booking, Fastag, insurance, cash collection, mobile & DTH recharge, bill payments, etc., to customers at their shops. Under e-RUPI, the issuer can track voucher redemption as well. Currently, there are 11 banks including HDFC Bank, ICICI Bank, Axis Bank, Bank of Baroda, SBI, Kotak Mahindra Bank, Indian Bank, etc., live on the platform.