Payment Systems Report December 2024 (RBI Report)

1. Recently, Payment Systems Report December 2024 was published by Reserve Bank of India (RBI).
    
   • This is a bi-annual publication from the RBI.
      
2. This report reveals a significant shift in India's payment system, highlighting the growth of credit card usage and digital payments over the past few years.

Key findings/highlights of Payment Systems Report:


 

1. Credit Card Growth
 

1. The number of credit cards in circulation has more than doubled in the last 5 years.
2. As of December 2019, there were 5.53 crore credit cards, which surged to approximately 10.80 crore by December 2024.
3. While the growth in credit card usage is striking, the number of debit cards has remained relatively stable, increasing slightly from 80.53 crore in December 2019 to 99.09 crore in December 2024.
    

2. Exponential Growth of Digital Payments
 

1. Digital transactions in India have grown 94 times in volume and 3.5 times in value from the year 2013 to 2024.
2. In 2013, there were 222 crore transactions worth Rs 772 lakh crore, while in 2024, this has escalated to over 20,787 crore transactions valued at Rs 2,758 lakh crore.
3. The last five years have seen a 6.7 times increase in volume and 1.6 times increase in value, reflecting a 5-year CAGR (Compound Annual Growth Rate) of:
   • 45.9% in transaction volume
   • 10.2% in transaction value
   • The Compound Annual Growth Rate (CAGR) is the average annual growth rate of an investment or value over a specific period of time, assuming the growth happens at a steady rate
      
4. Retail digital payments have also witnessed a remarkable rise, from 162 crore transactions in FY 2012-13 to 16,416 crore transactions in FY 2023-24, marking a nearly 100-fold increase over 12 years.
    
5. The Digital Payment Index (DPI), a key indicator of payment systems' growth, has surged by more than four times in the last six years, reaching 445.50 in March 2024 (up from a base of 100 in March 2018).
    

3. Cross-Border Payment Innovations
 

1. The RBI has been working towards enhancing cross-border payments, particularly by integrating India's Unified Payments Interface (UPI) with the fast payment systems of other countries.
    
2. This effort addresses challenges like high costs, slow processing times, limited access, and lack of transparency in cross-border remittance systems.
    
3. Key Developments:
    
   • In February 2023, the UPI system was linked to PayNow, Singapore’s fast payment system, allowing seamless cross-border transactions between India and Singapore.
   • As of now, UPI-enabled payments can be made to merchants via QR codes in Bhutan, France, Mauritius, Nepal, Singapore, Sri Lanka, and the UAE.
   • Project Nexus: The RBI has joined Project Nexus, an international initiative to enable instant cross-border retail payments by linking the domestic fast payment systems of multiple countries.
      

4. RBI's Role in Innovation and Payment System Modernization
 

1. The RBI has been proactive in fostering a supportive environment for payment system operators (PSOs) and encourages continuous innovation in the sector.
    
2. According to RBI Deputy Governor, the RBI has prioritized staying ahead of the curve when it comes to developing and modernizing India's payment systems. With strong regulatory support, India’s payment systems have become globally competitive and modern.

 

Introduction to India's Payment Systems   Payments are a critical component of economic activity and are increasingly recognized for driving financial inclusion, ensuring that benefits reach all segments of society, including underserved groups . Regulatory Framework:   The Payments and Settlement Systems Act, 2007 (PSS Act) provides the legal foundation for regulating payment systems in India. The Reserve Bank of India (RBI) is responsible for regulating, supervising, and licensing payment system operators, ensuring their safety, security, and efficiency.   Regulatory Bodies:   The Board for Regulation and Supervision of Payment and Settlement Systems (BPSS), chaired by the RBI Governor, formulates policies for regulating payment systems. It meets quarterly and reports annually to the RBI Central Board. Key Factors Driving Growth in Payment Systems   Unified Payments Interface (UPI)   UPI Launch and Impact: Launched in 2016 by the National Payments Corporation of India (NPCI), UPI has transformed the payment landscape. It consolidates multiple bank accounts into a single mobile interface, enabling easy, real-time peer-to-peer (P2P) and person-to-merchant (P2M) transactions.   Key Features of UPI:   UPI Lite: For small-value transactions that do not require an internet connection. UPI Lite X: For offline payments. UPI123Pay: For feature phone users, making UPI accessible to a broader audience.   Transaction Volume: UPI processes over 16 billion transactions a month, making it one of the largest payment systems globally.   Enhancements: Over time, UPI has introduced several features, including UPI 2.0, enabling recurring payments, and UPI 123Pay, providing access to feature phone users. UPI's monthly transaction count continues to grow rapidly as it evolves.

 

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