The Reserve Bank of India (RBI) has recently launched a composite Digital Payments Index (DPI) that tracks the growth and penetration of digital payments across the country. The index comes as part of an industry-wide push to enhance transparency, foster growth, and encourage digital adoption in India’s payment ecosystem.
Understanding The Index
The RBI-DPI is built on five key parameters that measure the expansion and deepening of digital payments over different timespans. The parameters are designed to assess various aspects of the digital payments landscape, including Payment Enablers, Payment Infrastructure (both demand and supply-side factors), Payment Performance, and Consumer Centricity.
Each of these parameters carries a specific weightage in the overall score calculation, with Payment Performance assigned the highest weight at 45%. Other parameters include Payment Enablers (25%), Payment Infrastructure – Supply-side factors (15%), Payment Infrastructure – Demand-side factors (10%), and Consumer Centricity (5%). The base period for the DPI is March 2018, which is assigned a DPI score of 100.
Publication and Growth Details
RBI intends to publish the index semi-annually beginning from March 2021, with a requisite lag of four months. The DPI score for March 2019 and March 2020 stand at 153.47 and 207.84, respectively, indicating significant growth in India’s digital payments landscape.
Digital Payments Scenario: Insights From Data Analysis
According to the Worldline India Digital Payments report, Unified Payments Interface (UPI) payments saw an 82% increase in volume and a 99% surge in value during Q2 of 2020-21 compared to the corresponding quarter in the previous fiscal year. This growth was backed by an increase in the number of banks providing UPI services, with 19 banks joining the UPI ecosystem during this period. As of September 2020, 174 banks were offering UPI services and the BHIM App was available to customers of 146 banks.
Recent Developments in the Digital Payments Ecosystem
Recently, in a major move to further deepen digital payments penetration, the National Payments Corporation of India (NPCI) granted approval to WhatsApp to roll out UPI services in a phased manner. The initial rollout is limited to a user base of 20 million. Another significant development was NPCI’s decision to cap the volume of transactions processed in UPI at 30% for all Third-Party App Providers (TPAPs), effective from January 1, 2021.
In addition to this, the RBI has established a Payments Infrastructure Development Fund (PIDF) to encourage acquirers to deploy Points of Sale (PoS) infrastructure, whether physical or digital, in tier-3 to tier-6 cities and northeastern states.
Other Initiatives By The RBI
Apart from the DPI, the RBI also releases several other reports and surveys at regular intervals. These include the Consumer Confidence Survey (CCS – Quarterly), Inflation Expectations Survey of Households (IESH – Quarterly), Financial Stability Report (Half-Yearly), Monetary Policy Report (Half-Yearly), and Report on Foreign Exchange Reserves (Half-Yearly). These publications provide crucial insights into various dimensions of India’s economic and financial health.