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Digital Payment Index: 40% jump in September 2021

 

Digital Payment Index: Relevance

  • GS 3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

 

Digital Payment Index RBI: Context

  • Recently, RBI has released Digital Payment Index which shows that digital payments in India rose to 304.06 in September 2021 against 217.74 in the year-ago month.

 

Digital Payment Index: Key points

  • Digital payments have increased by around 40% which shows the deepening of payments through digital modes in our country.
  • RBI said that the RBI-DPI index continues to demonstrate significant growth in adoption and deepening of digital payments across the country.
  • The RBI said the index will be published on a semi-annual basis with a lag of four months.
  • Base period of the RBI-DPI has been set as March 2018, which means DPI score for March 2018 is set at 100.

 

Digital Payment Index: 40% jump in September 2021_40.1

 

About the DPI index

  • The DPI index comprises five broad parameters that enable us to know the penetration of digital payments in the country over different time periods.
  • Parameters:  payment enablers (with 25 per cent weight), payment infrastructure—demand-side factors (10 per cent), payment infrastructure—supply-side factors (15 per cent), payment performance (45 per cent) and consumer centricity (5 per cent).

 

Digital payments in India

  • Experts have pointed out that Covid-19 pandemic has advanced digital payments adoption in the country by 5-10 years.
  • Jeffries reported that India sees over $2 trillion in digital payments on an annual basis on a combination of banking apps, cards, unified payments interface (UPI), mobile wallets and government-driven direct-benefit transfers.
  • UPI payments have seen the highest increase, and constitute $1 trillion of annualised payments (as of August 2021), followed by immediate payments services (IMPS).
  • While mobile wallets are growing, their transaction market share is lower, while national electronic fund transfer (NEFT) still drives a dominating $3.6 trillion in annualised payments.

 

Digital Payment Index: 40% jump in September 2021_50.1

 

Reasons for expansion of digital payments

  • A combination of initiatives by the government and the regulator has led to rapid replacement of cash transactions in favour of digital.
  • These include the JAM trinity (Jan Dhan Bank Accounts), Aadhaar-based identification and mobile penetration, launch of platforms like UPI, mobile banking and payment gateways, among others.

 

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