Why in the NEWS?

• The Reserve Bank of India's (RBI) Digital Payments Index (DPI) rose to 465.33 by September 2024 from 445.5 in March 2024.

Key Points:

• The increase in the RBI-DPI Index was due to the growth in payments infrastructure and payment performance across the country during this period," the central bank said in a statement.
• The DPI Index, launched in January 2021, reflects the extent of digitisation of payments across the country.

What will you read next in this topic?

1. 11.1% increase in digital payments
2. RBI's Digital Payments Index
3. Growing share of UPI
4. Declining share of other payment systems
5. Growth of UPI transactions

11.1% increase in digital payments

• According to the index of the Reserve Bank of India (RBI), digital payments in India registered a growth of 11.1 percent year-on-year till September 2024.
• This information was given in a statement issued by the RBI.
• The RBI said that this increase in the Digital Payments Index (RBI-DPI) is due to the improvement in payment infrastructure and payment performance across the country.
• The value of the index increased from 445.5 to 465.33 in March 2024.
• This increase reflects efforts to improve the capacity and infrastructure of digital payments in India.

RBI's Digital Payments Index

• The RBI has been publishing the Digital Payments Index from January 1, 2021, with March 2018 as the base year. 
• This index is published on a semi-annual basis. The purpose of this index is to measure the rate of expansion and use of digital payments across the country.

Five key parameters in the index

• The RBI's Digital Payments Index is based on five key parameters that measure the depth and penetration of digital payments:
• Payment enablers (25%)
• Payment infrastructure – demand-side factors (10%)
• Payment infrastructure – supply-side factors (15%)
• Payment performance (45%)
• Consumer centricity (5%)

Growing share of UPI

• UPI (Unified Payments Interface) has seen unprecedented growth in the field of digital payments in the last few years, and its share has grown rapidly in total digital payments.
• UPI's share in digital payments was just 34 percent in 2019, but it has increased to 83 percent in 2024. 
• Looking at this growth, it is clear that UPI has established its dominance in the Indian digital payment system.

Tremendous jump in CAGR (cumulative average growth rate)

• UPI has achieved a CAGR (cumulative average growth rate) of 74 percent in the last five years. 
• This growth rate is very impressive and it reflects the increasing utility and ease of use of UPI.

User-friendly and fast transactions

• The main reason for the success of UPI is its ease, fast transactions, and security. 
• Its utility has made it the preferred method for small to large-scale transactions. 
• The hassle-free sending and receiving of money through smartphones is making it extremely attractive for users.

Wide acceptance

• The growing share of UPI also shows that it is widely accepted not only among consumers but also among merchants and business entities. 
• Many government schemes, merchant platforms and digital wallets have adopted UPI, which has further increased its usage.

Declining share of other payment systems

• With the growth of digital payments in India, the share of some traditional payment systems is witnessing a significant decline. 
• This decline is mainly due to the growing popularity of UPI (Unified Payments Interface), which has overtaken other payment systems.

Declining Share

• From 2019 to 2024, other major systems involved in digital payments such as:
  • RTGS
  • NEFT
  • IMPS
  • Credit Cards
  • Debit Cards
• The total contribution of these systems has declined from 66 percent to only 17 percent. 
• This is a clear indication that these traditional systems are no longer being used as much as they used to be.

Growth of UPI transactions

• The volume of transactions done by UPI in 2018 was 375 crores, which has increased to 17,221 crores in 2024. 
• Along with this, the total value of transactions done by UPI has increased from ₹5.86 lakh crore in 2018 to ₹246.83 lakh crore in 2024. 
• Thus, UPI has achieved a CAGR (growth rate) of 89.3 per cent and 86.5 per cent in the last five years.