India's payment systems improve standing in global benchmarking exercise

The standing of the country's payment systems has improved: they are “leader or strong” on 25 parameters out of 40 in a benchmarking exercise, up from 21 in 2019, said the Reserve Bank of India (RBI) on Friday.

The number of indicators describing the country as “weak” declined to eight from 12 in 2019. India has moved to a leadership position as the digital payments system grows rapidly, the RBI said.

The benchmarking was first done in 2019, with respect to the position in 2017. A follow-on exercise, covering the same countries and parameters in the earlier study, was undertaken with respect to the position in 2020. It was done in 21 countries covering advanced economies, Asia, and BRICS (Brazil, Russia, India, China, and South Africa). Their payment systems were considered robust, diverse, and efficient.

Since the last exercise, India has demonstrated improvement in digital payment options available for bill payments, ticketing systems for public transportation, available channels for cross-border remittances and decline in cheque usage.

The exercise highlighted that there is scope for improvement in acceptance infrastructure i.e. ATMs and Point of Sale terminals. The Payments Infrastructure Development Fund (PIDF) scheme has been operationalised in 2021 to enhance the acceptance infrastructure and bridge the gap, said the RBI.

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. The slowdown in economic growth during 2020 also had a bearing on the demand for cash.

The learnings from the benchmarking exercise are expected to facilitate further improvements in the payments landscape in India, it said.