Benchmarking India's Payment Systems
The Reserve Bank of India on July 1st 2022 released data concerning India’s Payment Systems benchmarks. The data provides a comparative position of the payment ecosystem in India relative to other major countries.
The benchmarking activity was first conducted in 2019 concerning the position in 2017. This follow-on benchmarking exercise, covering the same countries and parameters used in the earlier study, was undertaken concerning the position in 2020. Below are the highlights of the study:
- India has been considered a ‘leader’ or ‘strong’ in 25 (21 in the previous exercise) out of 40 indicators and categorized as 'weak' in 8 (12 in the previous exercise) indicators.
- India has made a substantial improvement and moved to a leadership position in large value payment systems and fast payment systems, which contributed to quick growth in digital payments.
- Since the last exercise, India has demonstrated an improvement in digital payment options available for bill payments, ticketing systems for public transportation, available channels for cross-border remittances and a decline in cheque usage.
- The exercise highlights that there is an opportunity for improvement in acceptance infrastructure i.e., ATMs and PoS terminals. The Payments Infrastructure Development Fund (PIDF) scheme came into force in 2021 to improve the acceptance infrastructure and bridge the gap.
- The decline in India's rating in some parameters involving currency in circulation is explained by the increased demand for cash as a store of value during the Covid-19 pandemic-related lockdown and the slowdown in economic growth during 2020.
The learnings from the benchmarking exercise are expected to facilitate further improvement in the payments landscape in India.
B Sudhaman, Principal Associate