Recent reports reveal that the Reserve Bank of India (RBI) is considering extending its payment system worldwide in response to solicitations from various countries.
Inquiries for Adoption of Indian Payment Systems
The RBI has caught international attention by receiving several requests for implementing its dynamic payment systems, like the Cheque Truncation System (CTS), National Electronic Fund Transfer (NEFT), Unified Payments Interface (UPI), and messaging solutions abroad. This international interest can be attributed to India’s invention of cost-effective, innovative digital payment products.
Present International Reach of Indian Payment System
As it stands, there exist no RBI-approved payment system operators providing such services outside India. There are, however, cross-country collaborations, notably with Bhutan in relation to NEFT, National Automated Clearing House (NACH), and CTS. In addition, NEFT is utilized for one-way transfers from India to Nepal.
Potential for Global Expansion of Indian Payment System
The RBI believes there is room for increasing the global reach of its payment systems, including remittances. This could be achieved through active participation and cooperation in international and regional forums, collaborations, and contributing to standard setting. Efforts are underway to enhance the scope, coverage, usage, and global brand value of the RuPay card scheme and UPI.
Challenges in Global Implementation of Indian Payment System
Bringing this vision to fruition might not be without its hurdles. Issues such as over-dependence on foreign funds via digital payments could potentially result in liquidity risk concerns in India. Also, differences in international time zones could pose risks to digital payments.
The Progression of Digital Payments in India
The growth of retail digital payments in India suggests a shift in cash relationships. According to RBI statistics, digital payments have surged by 61% in volume and 19% in value. The value of digital payments relative to the Gross Domestic Product (GDP) has also progressed from 660% in 2014-15 to 862% in 2018-19. Furthermore, the deployment rate of Point of Sale (PoS) terminals has increased impressively by 35%, while the ATM expansion rate remains relatively low at 4%.
An Overview of Indian Payment Systems
India’s payment system comprises several innovative solutions:
The Unified Payments Interface (UPI) is an upgraded version of Immediate Payment Service (IMPS), offering round-the-clock funds transfer to make cashless payments quicker and more straightforward.
The National Electronic Funds Transfer (NEFT) allows for one-to-one funds transfer across the nation.
The RuPay Card Scheme is India’s first domestic Debit and Credit Card payment network, with transactions available abroad in certain countries.
The Cheque Truncation System (CTS) is an image-based cheque clearing system initiated by the RBI for faster clearing of cheques.
Lastly, the National Automated Clearing House (NACH) is a service for banks designed to streamline interbank high volume, low-value debit/credit transactions.
