Important economic terms in news because of demonetisation

Virtual Payment Address (VPA)It is a virtual address which links a user’s identity with his/her bank account. So, you can send/receive money by sharing your virtual payment address with any merchant site and make a payment. This eliminates the need to share private and confidential information like mobile number, bank account number or IFSC code.

Unified Payments Interface (UPI)
An instant payment system which allows users to transfer money between any two parties’ bank accounts by using unique identifiers like mobile number or VPA without using account number / IFSC codes. It means sending or receiving money by entering a mobile number or VPA.

  • No bank account or credentials on third party applications or websites required
  • It allows sending collect requests to others (person to person or entity to person) with ‘pay by’ date to allow payment requests to be ‘snoozed’ and paid later, before expiry date without having to block the money in the account until customer is ready to pay. 

Bharat Bill Payment System (BBPS)

BBPS would include systems to facilitate collection of repetitive (monthly, bi-monthly, quarterly etc.) payments for everyday utility services provided by utility service providers like electricity, telephone, water, gas, and direct-to-home television. Gradually, the scope would be extended to include services facilitating the collection of repetitive payments, such as, school / university fees, municipal taxes/payments.
 Payments can be either made in cash or through any of the various electronic modes of payment through Operating units (OUs). OUs will act as an interface between consumers and utility service providers.

The difference between cost of producing currency notes and value of that money is called ‘seigniorage’. If seigniorage is positive, the government gains and vice-versa.

Tax to GDP ratio
The tax-to-GDP ratio is the ratio of tax collected compared to the national Gross Domestic Product (GDP). This ratio helps in understanding the amount of economic activity in the country. If GDP grows, Tax to GDP ratio should ideally grow.

Real Time Gross Settlement (RTGS)

  • RTGS is a system of payment settlement. ‘Real Time’ means the processing of instructions at the time they are received rather than at some later time. ‘Gross Settlement’ means the settlement of funds transfer instructions occurs individually (on an instruction by instruction basis). Funds settlement is final and irrevocable because it takes place in the books of the Reserve Bank of India.
  • The minimum amount that can be remitted through RTGS is 2 lakh with no upper ceiling for transactions.

National Electronic Fund Transfer

  • The objective of the NEFT system is to establish an electronic funds transfer system to facilitate an efficient, secure, economical, reliable and expeditious system of funds transfer and clearing in the banking sector throughout India. While RTGS operates on gross settlements NEFT uses Deferred Net Settlement (DNS), which settles amount in batches. Amounts less than 2 lakh can be transferred. 

Immediate Payment System (IMPS)

 IMPS is an electronic funds transfer which takes place immediately from one bank to another through mobile phones. This facility is also extended to ATMs and internet banking. 


 RuPay, a new card payment scheme launched by the National Payments Corporation of India (NPCI). Through RuPay, RBI aims to offer a domestic, open-loop, multilateral system which will allow all Indian banks and financial institutions in India to participate in electronic payments.