While there has been robust growth in the volume of retail electronic transactions amid a strong regulatory framework, the country needs to enhance its payments acceptance infrastructure, a study on digital payments by the Reserve Bank of India has observed.
The findings are from a report on ‘Benchmarking India’s Payment Systems’, which provides a comparison of the payment ecosystem in India with the payment systems and usage trends in other major countries.
The central bank had undertaken the exercise of benchmarking India’s payment systems vis-à-vis payment systems in a mix of advanced economies, Asian economies and the BRICS nations.
“The study found that India has a strong regulatory system and robust large value and retail payment systems, which have contributed to the rapid growth in the volume of transactions in these payment systems,” RBI said.
“The report, however, notes that India is required to take further efforts to bring down the volume of paper-clearing and increase acceptance infrastructure to enhance digital payments,” the RBI said.
The data used for the benchmarking were mostly for the years 2012 and 2017.
While the report acknowledged that the growth in the volume of payment systems transactions had been strong and steady, the relatively high level of cash in circulation offered scope for a higher level of digitisation of payments, it said.
“There is an increase in Point of Sale (PoS) terminals, including mobile terminals, which, however, may not be enough to cater to the large population,” the report said.
The report observed low digital payment of utility bills, despite the existence of the Bharat Bill Payment System (BBPS), an integrated interoperable bill payment system which started live operations from October 12, 2017.
‘Lag in broadband infra’
The report also said digital communications infrastructure in the form of a robust mobile network is growing strongly, though broadband infrastructure “lags behind.”
The report highlighted that the last few years since demonetisation have witnessed a sea change in the payments landscape, with large growth in digital payments.
In 2018-19, the volume growth of retail electronic transactions was 95%, compared to 51% in the previous year, mainly due to to the steep growth in the use of the Unified Payments Interface (UPI), the report said.
The report also said that the level of credit card penetration in India was low when compared to advanced countries, where it was a preferred option for making payments.
“To encourage usage of cards, card infrastructure is required to be robust, strong and secure. Further, the last-mile availability of PoS terminals is relatively lower in India and much needs to be done in this regard,” it added.