Highlighting the need for a shift from cash to electronic payment systems, Reserve Bank of India Governor D. Subbarao has said that expanding the use of infrastructure such as ATMs, PoS (point of sale) terminals, micro-ATMs and hand-held devices in smaller towns and villages “is very much required”.

Dr. Subbarao pointed out that India had one of the lowest number of ATMs and PoS terminals — 63 ATMs and 497 PoS terminals per million population. Only a fraction of the 10 million plus retailers in the country have the infrastructure required for card payment.

The RBI Governor was here on Friday in connection with eighth edition of the Banking Technology Awards conferred by the Institute for Development and Research in Banking Technologies. Dr. Subbarao, who formally launched the Indian Banks Technology Consortium, said large value payment systems mostly shifted to electronic mode owing to the regulatory fiat.

But, “disappointingly”, retail payment systems continued to be paper-centric as electronic systems had not penetrated deep enough. “Though the usage of mobile and Internet banking is growing significantly, a significant customer base is still not covered,” he said.

As a result, the value of coins and bank notes in circulation was as high as 12 per cent of gross domestic product (GDP). The number of non-cash transactions per person stood at just six a year which was ‘very low’ compared to other emerging economies such as Brazil and Mexico. The RBI’s recent policy initiative in the form of ‘white label’ ATMs, those set up, owned and operated by non-bank entities, was expected to go a long way in increasing electronic payment acceptance. Dr. Subbarao said questions were being raised on the lack of initiative on the part of the banks to lead the efforts towards electronic payments. “A related question is: are banks taking the easy way out by being content with the measures initiated by the regulator?” he said.

On the slow pace of infrastructure development, he said expanding payment infrastructure had associated upfront costs. This raised question as to whether each institution should set up its own dedicated infrastructure or whether there were economies of scale in setting up shared infrastructure and competing for business. He quoted mobile companies in this context, which shared infrastructure while competing for a share in the mobile market.

He said the RBI was focussing on graduating to the next generation real time gross settlement system (RTGS) with enhanced liquidity saving features and higher processing capabilities. The RTGS was introduced in March 2004 for settling gross inter-bank and customer transactions of values over Rs.2 lakh.