Emergency Lightweight and Portable Payment System (LPSS)

The Reserve Bank of India (RBI) has proposed a Lightweight and Portable Payment System (LPSS).

To allow continued digital payments during emergencies such as natural disasters or war, LPSS is referred to as a “bunker” counterpart.
This system will function independently of existing payment methods such as UPI, NEFT, and RTGS.
During emergencies, it can be run from anyplace with a small team.
During harsh and turbulent conditions, it will execute key transactions such as bulk payments and interbank payments.
The system runs on minimum hardware and software and is only engaged when necessary.

The RBI is focused on enhancing the supervisory structure for Centralised Payment Systems, like as NEFT and RTGS, as part of the Utkarsh 2.0 initiative.
The programme aims to improve efficiency and reliability by enhancing existing payment systems and introducing new functionality.

Near-zero downtime: The RBI aims to create a payment system that can operate on minimalistic hardware and software, ensuring near-zero downtime of the payment and settlement system in the country.
Continuous liquidity pipeline: The lightweight system will facilitate uninterrupted functioning of essential payment services like bulk payments, interbank payments, and provision of cash to participant institutions, thereby keeping the liquidity pipeline of the economy alive and intact.
Stability of the economy: It is expected to process critical transactions, including government and market-related transactions that are crucial for maintaining the stability of the economy.
Enhancing public confidence: The resilient nature of the system will act as a bunker equivalent in payment systems, enhancing public confidence in digital payments and financial market infrastructure, even during extreme conditions.

Existing payment mechanisms include: The RBI recognises that multiple payment methods are available in India for individuals and institutions, each with its own distinct character and application.
Handling high transaction volumes: Traditional systems, such as RTGS, NEFT, and UPI, are built to manage high transaction volumes while assuring continuous availability, relying on complicated wired networks and advanced IT infrastructure.
Exposure to catastrophic events: Natural disasters and conflict, on the other hand, might temporarily disable these payment systems by interrupting the underlying information and communication infrastructure.
Preparedness for extreme conditions: To counter this risk, the RBI feels it is prudent to have a lightweight payment system that can operate in extreme and turbulent scenarios.

The RBI has not specified a timetable for the implementation of the lightweight payment and settlements system.
However, the concept is an important step towards maintaining the payment ecosystem’s resilience during calamities.
More research and development efforts are required to bring this system to maturity and improve India’s overall stability and confidence in digital payments.

Source: https://www.sentinelassam.com/national-news/rbi-plans-a-lightweight-and-portable-payment-system-for-use-during-emergencies-651603