On August 6, 2020, the Reserve Bank of India (“RBI”) permitted a pilot scheme for small value payments made in offline mode. Under this scheme, authorised Payment System Operators (“PSOs”) were allowed to provide offline payment solutions using cards, wallets or mobile devices for remote or proximity payments and these small value payments would be free from additional factor authentication (“AFA”). Entities other than PSOs that wished to participate were permitted to do so by tying-up with the authorised PSOs. The conditions for this pilot scheme were prescribed under DPSS.CO.PD.No.115/02.14.003/2020-21 dated August 06, 2020[1]. In a press release dated October 8, 2021, the RBI declared the pilot a success by stating that there exists the scope to introduce such solutions and undertook to provide a framework for implementation on a permanent bases.[2]

On January 3, 2022, the RBI announced the Framework for Facilitating Small Value Digital Payments in Offline Mode (CO.DPSS.POLC.No.S1264/02-14-003/2021-2022) dated January 03, 2022[3]. As per the Framework for Facilitating Small Value Digital Payments in Offline Mode, an offline payment means a transaction which does not require internet or telecom connectivity to take effect. The Framework for Facilitating Small Value Digital Payments in Offline Mode set out the following:

1. Offline payments may be made using any channel or instrument like cards, wallets, mobile devices, etc.
2. Offline payments can be made in proximity (face to face) mode only.[4]
3. Offline payment transactions may be offered without any AFA.
4. Payment instruments can be enabled for offline transactions only after obtaining explicit consent of the customer. In the case of cards, offline payments may be enabled without a requirement to enable the contactless transaction channel.
5. The upper limit of an offline payment transaction shall be ₹200 and the total limit for offline transactions on a payment instrument shall be ₹2,000 at any point in time. This total limit may be replenished of only through an online mode with AFA.
6. The issuer shall send transaction alerts to users as soon as transaction details are received. While details of each transaction do not need to be conveyed separately, the details of each transaction must be adequately conveyed.
7. The acquirer will incur all liabilities that arise out of technical or transaction security issues at merchant’s end.
8. Offline payments will be covered under the provisions of RBI’s limited customer liability circulars, as amended from time to time.[5]
9. Customers will have recourse to the Reserve Bank – Integrated Ombudsman Scheme, as applicable, for grievance redressal.

It is worth noting that the framework will see possible changes. The framework is subject to oversight by the RBI since the RBI has explicitly retained the right to stop or modify the operations of any such payment solution that enables small value digital payments in offline mode.

The concept of offline payments was introduced with the objective of extending payment technologies to places and situations where there is an internet connectivity is limited and, in particular, in remote areas.

[1] Available at: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11947&Mode=0

[2] Available at: https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=52368

[3] Available at: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12215&Mode=0

[4] This is a noteworthy departure from the pilot program which also permitted remote payments to be conducted.

[5] See DBR.No.Leg.BC.78/09.07.005/2017-18 dated July 06, 2017 (Available at: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11040&Mode=0); DCBR.BPD.(PCB/RCB).Cir.No.06/12.05.001/2017-18 dated December 14, 2017 (Available at: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11188&Mode=0) and para 17 of Master Direction on Prepaid Payment Instruments dated August 27, 2021 (Available at: https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12156).