Visa Inc. and contactless payment logos sit on a debit card in this arranged photograph, in London, U.K. (Photographer: Simon Dawson/Bloomberg)

RBI Aims To Push-Up Digital Transactions To 15% Of GDP By 2021

The Reserve Bank of India aims to push up digital transactions to about 15 percent of gross domestic product over the next two years from nearly 10 percent now.

While outlining a target for digital transactions, the central bank stayed away from putting a target to India’s cash-to-GDP ratio but said it hopes the economy will move to a “cash-lite” model, according to its ‘Vision Document on Payment Systems’ released on Wednesday.

This comes at a time currency in circulation has moved back to levels seen before demonetisation. Cash as a percentage of GDP is at 11.4 percent compared to 11.8 percent before cash ban. That’s despite mushrooming of digital payment options in recent years. While cash use remains high, its share in retail transactions has been declining and the RBI hopes to push it further through a series of steps.

What The RBI Hopes To Achieve

The regulator is targeting 12 specific outcomes, including:

  • Increase digital payment transaction turnover as a percentage of GDP to 14.80 percent in 2021 from about 10.37 percent in 2019.
  • Reduce volume of cheque-based payments to less than 2 percent from about 3 percent now.
  • Ensure a fourfold increase in digital transactions to 8,707 crore in December 2021 from 2,069 crore in December 2018.
  • Push up debit card transactions at point-of-sale by 35 percent between 2019 and 2021.
  • Push up total card acceptance infrastructure to six times the present level by the end of 2021. “This is expected to support the aim of a cash-lite economy as well as shift cash on delivery transactions to digital modes for e-commerce,” the RBI said.
  • Reduce currency in circulation with no specific target.
  • Facilitate mobile-based payment transactions as gauged on basis of the registered customer base.
  • Bring down pricing of electronic payment services by at least 100 basis points compared to current levels.
  • Improve security of digital payment systems and make them more customer-focused.
  • Increase competition by setting up more payment system operators.

How The RBI Hopes To Achieve This

To achieve these objectives, the RBI outlined 36 specific actions it hopes to take over the next two years. Some of these include:

  • Set up self-regulatory bodies for payment system operators.
  • Develop feature phone-based payment services to complement smartphone-based services
  • Develop offline payment solutions and USSD-based payment solutions.
  • Improve interoperability and build capability to process transactions of one system in another.
  • Improve availability of acceptance infrastructure for digital payments.
  • Widen the scope and use of domestic cards such as Rupay.
  • Explore adoption of newer technologies, including distributed ledger technology for enhancement of digital payment services.
  • Encourage w-mandates/standing instructions for payment transactions.
  • Push contact-less payments and tokenisation.
  • Improve use of bill discounting systems or TReDs.
  • Increase coverage of cheque truncation system.