The Reserve Bank of India’s (RBI) newly constructed digital payment index (RBI-DPI) recorded a 30.2% growth in 2020-21. The index rose to 270.59 at the end of March 2021, up from 207.84 a year ago. The data represents the rapid adoption and deepening of digital payments across the country. The rise could be attributed to the COVID-19 pandemic, as consumers were encouraged to use contactless payment methods.
RBI announced the construction of a composite index in 2018 to capture the extent of digitisation of payments across the country. According to a news report, the RBI-DPI comprises five broad parameters that can measure the penetration of digital payments in the country over different time periods. The parameters are payment enablers (weight 25%); payment infrastructure-demand-side (10%); payment infrastructure-supply side (15%); payment performance (45%); and consumer centricity (5%). The base year has been taken as March 2018 and the index is expected to be published on a semi-annual basis with a lag of four months.
These parameters have sub-parameters that consist of measurable indicators of digitisation penetration in the country. Payment enablers such as bank accounts, Aadhaar, mobile, and the Internet, among others constitute 25% of the overall index. The digital payments index is also a measure of calculating the growth of the country’s cashless economy for the government. Earlier this year, the RBI stated that the DPI for March 2019 and March 2020 work out to 153.47 and 207.84 respectively, indicating an appreciable growth.
Earlier, RBI Deputy Governor, T Rabi Sankar, announced that the central bank plans to introduce its own version of central bank digital currency (CBDC) in phases. RBI will first weigh its impact on various issues, including how it could hamper the deposit mobilisation abilities of banks, and its potential effect on the conduct of the monetary policy. As per a news report, conducting pilots in wholesale and retail segments may soon be a possibility. RBI is currently working towards a phased implementation strategy and examining use cases that could be implemented with little or no disruption.
RBI will evaluate the scope of CBDCs and will explore whether the underlying technology should be a distributed ledger or a centralised ledger, or whether it should vary based on use cases. Apart from this, RBI is also exploring other modalities such as token-based or account-based validation mechanisms and distribution architecture (direct issuance by the RBI or through banks).
During 2020, the country processed 25.5 billion real-time payments transactions, followed by 15.7 billion in China, 6 billion in South Korea, 5.2 billion in Thailand, and 2.8 billion in the UK. By 2025, digital payments in India could account for 71.7% of the total payments volume, leaving cash and cheques at 28.3%. Last year, the transaction volume share in the country stood at 15.6% and 22.9% for instant payments and other electronic payments, respectively. Paper-based payments had a considerable share of 61.4%. More than 70.3 billion real-time payment transactions were processed globally last year, a surge of 41% compared to the previous year, as the COVID-19 pandemic dramatically accelerated trends away from cash and cheques towards greater reliance on real-time and digital payments.
