The Reserve Bank on Friday announced the creation of a Payments Infrastructure Development Fund' with an initial contribution of Rs 250 crore.
Accordingly, the fund has been created to encourage the adoption of 'Points of Sale' machines by businesses in tier-3 to tier-6 centres and Northeastern states.
The PoS machines allow businesses to accept e-payments, thereby, mitigating the need to deal in cash.
Lately, the apex bank has been encouraging the adoption of e-payment modes.
"Over the years, payments ecosystem in the country has evolved with a wide range of options such as bank accounts, mobile phones, cards, etc," the RBI said in a statement.
"To provide further fillip to digitisation of payment systems, it is necessary to give impetus to acceptance infrastructure across the country, more so in underserved areas."
As per the statement, the Reserve Bank will make an initial contribution of Rs 250 crore to the PIDF covering half the fund and remaining contribution will be from card issuing banks and card networks operating in the country.
"The PIDF will also receive recurring contributions to cover operational expenses from card issuing banks and card networks," the statement said.
"The Reserve Bank will also contribute to yearly shortfalls, if necessary. The PIDF will be governed through an Advisory Council and managed and administered by the Reserve Bank."
RBI first proposed the fund in 2016 in a concept paper of card acceptance infrastructure where it proposed setting up an Acceptance Development Fund (ADF).
“The ADFs are market-driven initiatives (sometimes with regulatory recognition) where different stakeholders in the card payment value chain come together to set up a program to encourage wider deployment of card acceptance infrastructure,” it said at the time.
It said that the main objective of the ADF program is to subsidise the cost of acceptance infrastructure such that it enables banks to speed up their merchant acquiring activities and increase penetration in both existing market segments as well as new markets.
“Essentially, ADF functions as a financial pool which can be accessed to address some of the economic constraints associated with acquiring / setting up infrastructure to acquire card payments. This helps to reduce the stress on thin margins and also helps in reducing the payback period of investment for acquirers,” it said at the time.