The Payment Infrastructure Development Fund (PIDF) is a fund set up by the Reserve Bank of India (RBI), in consultation with major authorized card networks, to facilitate the development of payment acceptance infrastructure in tier-3 to tier-6 cities and north-eastern states of India.
Starting from January 1, 2021, the PIDF scheme has been activated to promote economic growth for the next three years. The RBI is responsible for operationalizing the scheme, with the Chairman of the Payments Council of India at the helm. If need be, the scheme's validity can be extended for two more years, providing a longer-term outlook for financial progress.
This scheme is a part of the Government of India's efforts to promote digital payments and reduce cash transactions. It aims to provide financial assistance to eligible entities for setting up, extending and modernizing payment infrastructure across the country. The scheme is expected to benefit both consumers and businesses by making digital payments more accessible and convenient.
What was the objective of the PIDF scheme?
The PIDF scheme was set up with the aim to make life easier for citizens in India's tier-3 to tier-6 cities, with a special focus on the north-eastern states. This government initiative will allow merchants engaged in services such as transport and hospitality, government payments, fuel pumps, public distribution system (PDS) shops, healthcare and kirana shops to accept payments through debit and credit cards.
The PIDF is generously funded by the Reserve Bank of India to the tune of Rs. 250 crores and card networks contributing Rs. 95 crores, bringing the total corpus to Rs. 345 crores. To ensure that the fund keeps growing, card networks have agreed to contribute 0.01 paisa per rupee of transaction each year, along with other contributions from card-issuing banks.
This progressive move by the government will bring convenience and financial inclusion to the lives of millions across India, making payment acceptance easier and more secure.
What was the government's plan for managing the scheme?
An Advisory Council chaired by RBI Deputy Governor BP Kanungo was set up to manage the PIDF. The Advisory Council devised a transparent mechanism for the allocation of targets to acquiring banks and non-banks in different segments and locations. The RBI, with assistance from card networks, the Indian Banks’ Association (IBA), and the Payments Council of India (PCI), monitored the implementation of these targets.
How was the PIDF scheme implemented?
The scheme focused on targeting merchants who had yet to be terminalised -those without any payment acceptance devices. It was tentatively decided that tier-3 and tier-4 centres would receive 30% of the acceptance devices, tier-5 and tier-6 centres would get 60%, and the north eastern states would be given 10%.
Multiple payment acceptance devices and infrastructures that supported underlying card payments, such as physical Point of Sale, mobile Point of Sale, General Packet Radio Service (GPRS), Public Switched Telephone Network (PSTN) and QR code-based payments are being funded under this scheme.
How did the government ease the process?
The government aimed to offer a generous subsidy of between 30% and 50% for physical Point-of-Sale (PoS) devices and 50% to 75% for digital PoS devices. This subsidy was granted half-yearly after ensuring that performance parameters were achieved, including conditions for active status and minimum usage criteria.
The Reserve Bank of India (RBI) has reported impressive growth in the number of physical and digital payment acceptance devices deployed under the PIDF Scheme. As of December 31, 2022, the total number stands at an estimated 1.87 crore. This marks a significant jump from the initial figure at the time of the scheme’s launch.
The PIDF scheme is a great step forward towards improving the payment acceptance infrastructure in India. With its generous subsidies, the PIDF scheme is likely to make a tangible difference in the lives of people living in these areas.
