eRUPI: How purpose-specific vouchers can accelerate the growth of MSMEs

The launch of e-RUPI brings India another step closer to digital governance.


The launch of e-RUPI brings India another step closer to digital governance. A person and purpose-specific digital payment solution will enable leakage-proof delivery of benefits extended by sponsors. e-RUPI is likely to transform the economic landscape of India, MSME and the rural segment, which largely remains outside the formal financial fold, is likely to be the key beneficiary of this digital solution.

What is e-RUPI?

e-RUPI is a government initiative to seamlessly pass on welfare services to the eligible beneficiaries. These are pre-paid digital vouchers which are directly delivered to the phones of beneficiaries. At present these digital vouchers are extended by the Government, however, private entities will also be allowed to extend these vouchers to their employees. e-RUPI is a contactless and cashless pre-paid digital payment system.

How does e-RUPI work?

The digital vouchers allow the purchase of specific goods or services, however, it does not allow the beneficiary to convert the voucher to cash or transfer the voucher to another person. The e-RUPI is delivered to the beneficiary by means of a QR code or SMS string-based e-voucher, the redemption of such a voucher does not require any digital card, digital payment app etc.,

The Government has identified a list of private and public banks as issuing entities. The beneficiaries will be identified based on the mobile number registered on their Aadhaar card. The e-voucher will be sent to this mobile number and can be redeemed only by them for the specific purpose it has been issued.

Benefits of e-RUPI to MSMEs and rural India

e-RUPI leverages the fact that 79% of the Indian population has a mobile connection. This digital solution is designed with the intent to bring the unorganised segment within the fold of the economic system and increase the robustness of economic activity. Some of the apparent benefits for MSME and rural segments are:

  • Connects welfare sponsors and beneficiaries – Many of the subsidies extended to MSME and rural India (particularly farmers) do not reach them due to the threat of leakage primarily due to intermediaries. This initiative ensures that the welfare schemes are delivered to the beneficiaries without intermediaries. This digital payment mechanism is likely to be used extensively to provide healthcare support, fertiliser subsidies, welfare schemes and other subsidies.

  • Safe and secure payment mechanism – There have been many instances of misappropriation or loss of welfare funds due to physical transactions. E-RUPI is a contactless and cashless solution. Under this payment system, the benefit is transferred in the form of QR code or SMS to the beneficiary directly; they cannot be cashed out or transferred to peers. These e-vouchers are personal and purpose-specific, they are pre-paid in nature and payment to the service provider is done only after completion of the transaction. It also maintains the confidentiality of beneficiary details.
  • Reaches unbanked population: A large part of the population remains unbanked. This digital payment system aims to bring them within the formal economic system in the long term. Many who operate in the MSME segment remain unaware of the welfare schemes extended to them or are not sure where to procure the benefit from. This digital payment solution ensures that such hurdles are eliminated. Extending credit to the unbanked population has been particularly challenging; e-RUPI works with smartphones and feature phones and does not need a bank account. In my opinion, these capabilities can be used by lenders to provide credit to borrowers. These e-vouchers are purpose-specific and hence, usage of funds can be specified. This will ensure that the funds are not misused. The MSME sector’s credit gap is quite apparent, e-RUPI is a great way to open credit for unbanked borrowers.
  • Timely disbursement of welfare funds: Often credit or subsidies extended to MSMEs or farmers respectively do not reach them on time, which leads to loss of revenues or increased indebtedness. Leveraging technology and the elimination of intermediaries ensure the timely disbursement of welfare funds.
  • Ideal solution for non-digital savvy beneficiaries: Many of the individuals who operate in the rural parts of India and who are engaged in the MSME sector are not digitally savvy. While mobile banking, digital payments may be highly uncommon, they may not even operate their bank frequently. These e-vouchers do not require cards, mobile banking, digital payment apps etc.,
  • Purpose-specific vouchers to drive economic activity: These e-vouchers are for a specific purpose of procuring goods or services, thereby encouraging the MSME or rural segment to spend the funds. This indirectly increases the liquidity in the economy, often the funds deposited in the bank accounts are kept as-is in an attempt to save for a rainy day. Robust economic activity will translate to increased GDP growth. The advent of e-vouchers takes India one step closer to the set target of 50% contribution from MSME towards GDP.
Future outlook
The e-RUPI will be available to the private sector; they can extend specific benefits to their employees and use these e-vouchers as part of their CSR (Corporate Social Responsibility) activities. This could make education, health support more accessible for the rural segment. e-RUPI could also make credit easily accessible for the MSME segment.

This initiative leverages technology to enable a positive transformation of the less privileged segment. This is yet another step towards the digital transformation of India, there’s many more to come!

The writer is Co-Founder, Eko.



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e-Rupi: eRUPI: How purpose-specific vouchers can accelerate the growth of MSMEs
eRUPI: How purpose-specific vouchers can accelerate the growth of MSMEs
The launch of e-RUPI brings India another step closer to digital governance.
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