Diwali Shoppers Break UPI Records
October saw Indians take to digital payments like never before – UPI transactions surged to a record with 7.3 billion transactions worth INR 2.11 trillion and as Dilip Asbe, MD CEO of NPCI highlighted, payments at merchant outlets accounted for more than half transactions for the first time, and QR codes have reached the smallest of Indian towns with less than 5000 population. Clearly people are making a behavioural shift in payments away from cash, and the latest SBI EcoWrap showed that for the first time in 20 years, currency in circulation declined during the Diwali week. While the phenomenal growth in digital payments has come because of government push, policy still favours free UPI transactions. Meanwhile, a study by Ashish Das (IIT Bombay) shows that banks are limiting the number of free UPI debits from savings accounts, with per transaction charges kicking in over the free limit, in a bid to recover operational costs on infrastructure. Vatsala Shreeti (BIS) and Mansi Kedia (ICRIER) have set out the issues at stake in an op-ed and given the example of Brazil where there is no price regulation and charges on PIX, a system comparable to UPI, are relatively low; they advocate comprehensive data on costing and user preferences including analysis of competition in the sector to determine the right way forward.
Last month the Prime Minister dedicated 75 Digital Banking Units across 75 districts to the nation. In an interview to BQPrime, Sumita Kale (ICFI) noted that this is a great initiative in terms of its direction and the statement it makes, yet these units might not work for all types of customers in India. Expanding financial inclusion further is likely to require a more granular understanding of impediments and a further strengthening of the business correspondent network. In this context, the Department of Financial Services’ pilot Financial Inclusion campaign at Gram Panchayat Level will be more critical to plug the remaining gaps on the ground.
The landscape for digital payments is changing rapidly in India. The RBI released a concept note on Central Bank Digital Currency (CBDC) last month and announced the operationalisation of CBDC-Wholesale pilot. The launch of the wholesale pilot has gone smoothly and a pilot for retail is set to be operationalised within a month amongst a closed user groups in select locations. As Tamal Bandopadhyay noted, CBDC is not set to make for a cashless economy, but what it will do is reduce significantly the costs of the banking system on printing money, its distribution and cleaning up soiled notes. The cost of remittances will also get considerably cheaper in cross-border transactions. All in all, India is moving rapidly towards a more efficient payments system.
There is some good news on the gender front as Finance Ministry is moving to increase the share of women business correspondents from the current 8-10% to at least 30%. Also as India takes on the G20 Presidency in December, womens’ economic empowerment and entrepreneurship have been identified as a key focus area. Debosmita Sarkar and Sunaina Kumar identify priorities for India in their paper that analyses the impact of the Jan Dhan Yojana and the MUDRA Yojana on women’s financial inclusion.
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