Digital Payments in India

Image Source: Moneycontrol

Practice Question: The digital payment ecosystem in India has improved in the last few years, however, has not progressed at the desired pace. Comment. – 150 words. 

Recently, the Reserve Bank of India conducted a study on ‘Benchmarking India’s Payment Systems’ which provides a comparison of the payment ecosystem in India with the payment systems and usage trends in other major countries.

As per the report, while there has been robust growth in the volume of retail electronic transactions amid a strong regulatory framework, the country needs to enhance its payments acceptance infrastructure.


Infrastructure – The study found that India has a strong regulatory system and robust large value and retail payment systems, which have contributed to the rapid growth in the volume of transactions in these payment systems. The report, however, notes that India is required to take further efforts to bring down the volume of paper-clearing and increase acceptance infrastructure to enhance digital payments.

The report also said digital communications infrastructure in the form of a robust mobile network is growing strongly, though broadband infrastructure “lags behind.”

Need for habitual changes in people – The report observed low digital payment of utility bills, despite the existence of the Bharat Bill Payment System (BBPS), an integrated interoperable bill payment system which started live operations from October 12, 2017.

Scope of development

The report highlighted that the last few years since demonetisation have witnessed a sea change in the payments landscape, with large growth in digital payments. In 2018-19, the volume growth of retail electronic transactions was 95%, compared to 51% in the previous year, mainly due to to the steep growth in the use of the Unified Payments Interface (UPI), the report said.

While the report acknowledged that the growth in the volume of payment systems transactions had been strong and steady, the relatively high level of cash in circulation offered scope for a higher level of digitisation of payments.

Way ahead:

To encourage usage of cards, card infrastructure is required to be robust, strong and secure. Further, the last-mile availability of PoS terminals is relatively lower in India and much needs to be done in this regard.

Source: The Hindu

Categories: POINT IAS

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