RBI finds NPCI incomparable
2022 was the year Indians took to retail digital payments like never before. In December, UPI transactions continued to soar upwards, moving past 7800 million, valued at more than Rs. 12.8 trillion. Payments to merchants made up more than 53% of the total transactions in December, around 80% of these transactions were very small value (less than Rs. 500). While Paytm reported that two out of three of its new users are coming from smaller cities and towns, MobiKwik saw transactions from 99 per cent of India’s pin codes. Even as the debate on pricing of these and other digital payment methods remains to be resolved, the RBI did note in the latest Report on Trend and Progress in Banking in India that it “endeavours to structure its policies and streamline the framework of charges for different payment services and activities in the country. This will ensure that India has a state of-the-art payment and settlement system that is not just safe, secure, efficient and fast but also affordable.” Industry has batted for tiered charges, with government subsidy allowing low-value transactions to be free for consumers. It remains to be seen how (and whether) the Finance Ministry will respond through the Union Budget on 1st February.
NPCI’s success in setting up digital payment statistics seems set to go unchallenged, as of now. The RBI had invited applications in 2021 for the New Umbrella Entity (NUE) license, to be set up as competitors to NPCI’s current monopoly status. Now, almost two years later, reports are that the RBI has not found any of the six applicants worthy. It appears that in RBI’s eyes, NPCI is incomparable. Digital payments markets have a natural tendency towards the domination of a few players, and improving governance, transparency and declaring NPCI as a Critical Infrastructure Payments Company (CPIC) as recommended by the Watal Committee Report can go a long way in mitigating the risks of monopoly concentration (Indicus Policy Brief October 2018).
In order to address the gender gap in usage of bank accounts, one initiative by the government has been to raise the number of women Business Correspondents (BCs). Under the government’s “One Gram Panchayat, One BC Sakhi” mission launched in 2019, so far 102,558 SHG members have been trained and certified as BCs and around 88000 of these are already providing services. This mission has been making a positive impact, bringing more women and other vulnerable segments into the fold of banking, as well as empowering the woman BC herself and her family. One of our recommendations to the Finance Minister during the pre-Budget consultations for 2023-24 was to extend the monthly stipend for the newly trained BC Sakhi from the current guideline of six months to cover the full first year. This support in rural locations will make the new BC Sakhi secure in her work till the number of transactions build up.
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Listen to the recording of a candid conversation on Twitter Spaces held on 15th December 2022, hosted by BQ Prime, where fundamental questions on the nature of digital public good and charges were discussed, with honest and often provocative views. Anand Kumar Bajaj, BG Mahesh and Dilip Vamanan were in conversation with Shinjini Kumar, Monica Jasuja and Vishwanath Nair.
Sahamati has an insightful report out capturing the current trends, existing and potential use cases and its expected evolution over the next five years (2023-2027)
CGAP has brought out a report that highlights technological trends and fintech business models with high potential to reach underserved MSEs with improved and responsible financial services.
Dvara Research has undertaken a study with the Centre for Social and Behaviour Change on making UPI payments more customer-centric for new-to-UPI users.
A must read article by Arundhati Ramanathan at The Ken, citing research by Monami Dasgupta from D91 Labs on chit funds
Reserve Bank of India clarifies on KYC updation guidelines towards simplified procedures.
Bhargavi Zaveri-Shah looks at the implication of the Supreme Court's judgement on demonetisation for three stakeholders in Indian society: the common person; the law makers; the experts such as the members of the board of the Reserve Bank of India (RBI).
Pramod Varma writes on what's in store for India's digital transformation in 2023.
Monica Jasuja leads a conversation on what makes UPI the dominant force in India’s digital payment landscape.
Nik Milanović writes on the next fintech revolution - agricultural finance.
Saksham Khosla, Michelle Nazareth and Kabir Sethi from Dalberg Advisors have a comprehensive evaluation of the latest initiative of the Reserve Bank of India (RBI) to use CBDC as an enabler of financial inclusion.
Anand Kumar Bajaj from PayNearby writes on the sachet economy empowering hitherto financially unserved segments of Bharat.
Reserve Bank of India Deputy Governor Shri T Rabi Sankar spoke on Fintech and Regulation at the Business Standard Summit in Mumbai on 21st December 2022.
Leora Klapper from The World Bank writes a blog post for The Brookings Institution on the impact of technology on financial inclusion, citing global evidence.
Sunaina Kumar from Observer Research Foundation has a policy brief analysing the gender gaps in financial inclusion in India, outlining the impediments, and examining the potential of digital services in creating solutions.
Women's World Banking has an easy-to-use scorecard out to check gender bias for lenders.
Satrajit Saha from TransUnion UK and Europe gives a global overview of vulnerable segments, excluded from formal financial services and examines how data can be used to foster inclusion.
At a meeting with the Reserve Bank of India (RBI) Governor, Digital Lenders Association of India (DLAI) – the industry association for digital lenders –suggested that the central bank could look at a reasonable cap to the FLDG models, given RBI's concerns of around build-up of systemic risk and 100% risk transfer rather than banning it outright.
Amitabh Behar from Oxfam India, talks of the impressive digital transformation India is undergoing, and highlights the growing digital divide as specific segments lag behind others.
Ajay Seth, Secretary, Economic Affairs, Ministry of Finance and Dr. Michael D. Patra, Deputy Governor Reserve Bank of India (RBI) set out the G20 priorities for financial inclusion:
Aishwarya Narayan from Dvara Research writes on the impact of the JAM trinity on poverty alleviation.
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