07-01-2021 | 12:06 PM
Digital Payments Index
Context
The Reserve Bank of India recently released the Digital Payments Index with March 2018 as the base period to measure the extent of digitization of payments across the country.
Key Highlights
Reserve Bank of India’s Digital Payments Index will be published on the central bank’s website semi-annually from March 2021 onwards with a lag of four months.
The Digital Payments Index comprises five broad parameters. These parameters have different weights to measure the penetration of digital payments in the country. The following are the parameters of the Digital Payments Index and its penetration:
Payment Enablers: 25%. The sub factors of the payment enablers of the Digital Payments Index comprises internet, mobile, bank account, merchants and participants.
Payment Infrastructure-Demand Side factors: 10%. The sub parameters for the Payment Infrastructure of Digital Payments Index comprises credit card, prepaid payment instruments, debit card, point-of-sale terminals, quick response codes, automated teller machines.
Payment Infrastructure-Supply Side factors: 15%
Payment Performance: 45%. The Payment Performance carries the highest weightage in the Digital Payments Index. The Sub parameters of Payment Performance of Digital Payments Index are paper clearing, cash withdrawal rules, e volume and value of digital payments, unique users and currency in circulation.
Consumer Centricity: 5%. The RBI would consider customer education and awareness, complaints, frauds, system declines under the consumer centricity of the Digital Payments Index.
Each of these parameters has sub-parameters which, in turn, consist of various measurable indicators.
The Digital Payments Index for the year 2019 was 153.47 and for that of 2020 was 207.84.
Why do we need a Digital Payments Index?
The digital payments in India have seen a rapid increase in adoption of digital platforms lately. According to the Unified Payments Interface (UPI), in December 2020 around 223 crores of transactions worth 4.16 lakh crores of rupees were made as compared to that of 221 crores of transactions worth 3.9 lakh crores of rupees in November 2020. This clearly indicates that the country's digital transactions are increasing day by day. Therefore, it is essential to measure its growth and launch respective initiatives to support the growth.
