The Reserve Bank of India has introduced a Digital Payments Index to effectively track the growth in digital transactions across the country.
The Digital Payments Index consists of 5 parameters that reflect the penetration and deepening of various digital payment modes accurately.
These parameters are:
- Payment Enablers (weight 25%)
- Payment Infrastructure – Demand side (10%)
- Payment Infrastructure – Supply side (15%)
- Payment Performance (45%)
- Consumer Centricity (5%)
Each of these parameters have sub-parameters consisting of various measurable factors through which digital payments can be accessed by regulators.
Under the parameter payment enablers, RBI regulators measure factors such as internet, mobile, Aadhaar, bank accounts, participants and merchants.
The payment infrastructure – demand side parameter includes factors such as credit cards, debit cards, prepaid payment instruments, customers registered- mobile and internet banking and FASTags.
The payment infrastructure – supply side parameter includes factors such as bank branches, business correspondents, ATMs, PoS terminals and QR codes.
For the payment performance parameter, RBI regulators measure factors such as the volume and value of digital payments, unique users, paper clearing, currency in circulation and cash withdrawals.
The customer centricity parameter includes factors like customer education and awareness, frauds, complaints, declines and system downtime.
The Digital Payments Index has been constructed with March 2018 as the base period with DPI score set at 100. After that, the DPI rose to 153.47 in March 2019 and 207.84 in March 2020.
As per the latest RBI press release on 1st January, DPI will be made available on RBI’s website on a semi-annual basis from March 2021 onwards with a lag of 4 months.
The digital payments have increased significantly in the last few years in India thanks to the unified payments infrastructure which was launched in India in 2016. Soon after the launch, UPI became one of the most used digital payment platforms and the UPI transactions rose to 2.2 billion in November 2020.
The RBI has been emphasizing more on digital transactions to improve efficiency in the financial system.