The Reserve Bank of India (RBI) recently made public a document titled ‘Payment and Settlement System in India: Vision 2019 – 2021’. This vision document lays out the RBI’s strategy geared towards empowering all Indians with access to a variety of safe, secure, convenient, quick and affordable e-payment options.
Objectives of the Vision Document
Setting the goal of achieving a ‘highly digital’ and ‘cash-lite’ society, the vision document presents 36 specific action points aimed at encouraging competition, cost-effectiveness, convenience, and confidence (the 4Cs) in India’s payment and settlement system. The RBI has not laid down a specific target for reducing cash circulation but hopes that the growing availability of Point-of-Sale (PoS) infrastructure will naturally lead to a decrease in the demand for cash.
The Expected Growth in Digital Transactions
The vision document anticipates a four-fold increase in digital transactions over the next two years. The RBI foresees significant growth in individual retail electronic payment systems. Payment systems like the Unified Payments Interface (UPI) and Immediate Payment Service (IMPS) are projected to register average annualised growth of more than 100% and National Electronic Funds Transfer (NEFT) at 40%. The use of digital modes of payments for purchasing goods and services is targeted to grow by 35% through an increase in debit card transactions at PoS terminals.
| Payment System | Projected Growth |
|---|---|
| UPI and IMPS | Over 100% |
| NEFT | 40% |
| Debit Card Transactions at PoS Terminals | 35% |
Additional Measures Proposed by the RBI
As part of its future-oriented strategy, the RBI has also proposed measures like creating customer awareness, establishing a 24×7 helpline and setting up a self-regulatory organisation for system operators and service providers. The RBI expects the payments landscape to change with continued innovation and the entry of more players. It is hoped these developments will provide optimal cost benefits to the customers and freer access to multiple payment system options.
The Regulatory Role of the RBI
The RBI operates under the Payment and Settlement System Act (PSSA), 2007 which authorises it to regulate payments and settlement systems in India. As outlined in the PSSA 2007, a payment system is any system enabling payment to be effected between a payer and a beneficiary. This includes clearing, payment or settlement service, or all of them, but does not include a stock exchange. Both paper-based systems like cheques and demand drafts, and digital systems like NEFT and BHIM app, fall under this definition.
