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RBI- Digital Payments Index

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Bharathi Pradeep
Bharathi Pradeephttps://www.getcooltricks.com/
Editor at GetCoolTricks.com. Bharathi covers topics on Competitive exams, How To guides, Current exams, Current Affairs, Study Materials, etc. Follow her on social media using the links below.

The Digital Payment Index (DPI), released in September 2021, shows an increase of 39.64% as 304.06 DPI against 217.59 in the same month. As per the index for March 2022, DPI is at 349.30 from 304.06 for September 2021.

Essential Points of the Digital Payment Index

  1. RBI decided to publish the Digital Payments Index (DPI) semi-annually from March 2021 onward with a lag of 4 months. Therefore, in 2021 RBI started releasing DPI for March and September in the months of July and January, respectively.
  2. The Base period of the RBI-DPI has been set as March 2018, at a score of 100.
  3. The DPI index comprises five broad parameters to evaluate the penetration of digital payments in the country.

The parameters are as follows and each of these has Sub Parameters consisting of measurable indicators:

ParameterWeightage              Sub Parameters
Payment Enablers 25% Internet, mobile, Aadhaar, bank accounts, participants, and merchants
Payment Infrastructure (Demand Side)10% Debit cards, credit cards, prepaid payment instruments, customers registered–mobile and internet banking, and FASTags
Payment Infrastructure (Supply Side) 15% Bank branches, business correspondents, ATMs, PoS (point of sale) terminals, QR (quick response) codes, and intermediaries
Payment Performance  45% Digital payment systems (volume), digital payment systems (value), unique users, paper clearing, currency in circulation, and cash withdrawals
Consumer Centricity5% Awareness and education, declines, complaints, frauds, and system downtime

Magnification of Digital Payments

Many initiatives taken by the government and the regulatory body have propelled replacing cash transactions with digital transactions, such as the JAM trinity (Jan Dhan Bank Accounts), Aadhaar-based identification and mobile penetration, the launch of platforms like UPI, mobile banking, and plenty of payment gateways options available.

The rise in the DPI index can be understood from the following series of RBI-DPI indexes:

PeriodRBI-DPI Index
March 2018 (Base) 100
March 2019 153.47
September 2019 173.49
March 2020 207.84
September 2020 217.74
March 2021 270.59
September 2021304.06
March 2022349.30

Reasons for the Increase in Digitisation

  1. The Covid-19 period accelerated Digital Payments in the country; it was established as a safe payment mode during the pandemic.
  2. Many apps and payment mode technology leapt into the market, like Paypal, Amazon, Apple, Alibaba, Google, Paytm, and various other FinTech that have leveraged customers’ payment convenience to capture the newly flourishing Digital market.
  3. According to PhonePe and Boston Consulting Group (BCG) report, India’s digital payments market is expected to grow more than threefold from $3 trillion to $10 trillion by 2026. Thus, going to this report, two out of every three payment transactions is likely to be digital payment by 2026.
  4. Consumer convenience, awareness of scanning QR codes, and internet accessibility even in unexplored interior regions will fetch the next level of growth in the Digital payment market. 

Features of Unified Payments Interface (UPI):

The Unified Payments Interface (UPI) is a revolution in the Digital market because of the following features:

  • User-friendly and supports easy and secure money transfers between bank accounts.
  • It’s an instant payment solution that facilitates inter-bank transactions.
  • It enables widespread digital payment solutions in the country.
  • It was developed and launched by the National Payments Corporation of India in 2016.
  • It boasts over a billion transactions every month.
  • Till July 2022 a number of banks on UPI has reached 338 in comparison to 235 banks in July 2021 and a volume of 6.28 billion from 3.25 transactions.
  • The National Payments Corporation of India, in the next 3-5 years, targets to achieve 1 billion transactions per day on the UPI platform.
  • Karthik Raghupathy, head of the strategy and investor relations, PhonePe, recently said to a magazine that the volume of UPI transactions has gone up to about 46 billion in FY22 from 5 billion in Financial Year 2019, which accounts for more than 60% of all non-cash transaction volumes in FY22.

The National Payments Corporation of India (NPCI), set up by RBI and the Indian Banks’ Association for operating retail payments and settlement systems in India, recently approved an additional 60 million users on UPI for WhatsApp. So far, this has been a significant development for digital payments. The NPCI aspires to bring innovative technology to retail payment systems and provide a robust infrastructure to the Banking sector for physical and electronic payments. It is already facilitating secure payment solutions at a minimal cost through a bouquet of retail payment products such as RuPay card, Immediate Payment Service (IMPS), Unified Payments Interface (UPI), Bharat Interface for Money (BHIM), BHIM Aadhaar, National Electronic Toll Collection (NETC Fastag) and Bharat BillPay.

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Bharathi Pradeep
Bharathi Pradeephttps://www.getcooltricks.com/
Editor at GetCoolTricks.com. Bharathi covers topics on Competitive exams, How To guides, Current exams, Current Affairs, Study Materials, etc. Follow her on social media using the links below.
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