The Reserve Bank of India on Friday (July 1, 2022) released the report on Benchmarking India’s Payment Systems providing a comparative position of the payments ecosystem in India relative to other 21 major countries.
The pilot exercise for benchmarking India’s payment systems was undertaken in 2019 with respect to the position in 2017. The above exercise was conducted for 21 countries, (including advanced economy countries, Asian economies, and BRICS (Brazil, Russia, India, China, and South Africa) nations, where payment systems were considered robust, diverse, and efficient.
According to the latest report, India’s payment system has seen significant progress in global benchmarking, particularly in areas like digital payment volume and the growth of fast payment methods like UPI. While India leads in areas like regulations, ATM deployment, and cross-remittances, it also lags in others such as PoS terminals, cheque usage, and mobile/broadband penetration.
This exercise of benchmarking India’s payment systems aims to assess the progress of India’s payments ecosystem against other major countries as also ascertain the strengths and shortcomings of the Indian payments ecosystem. The exercise also seeks to examine the user preferences for payment systems and instruments vis-a-vis other jurisdictions”, said the RBI report.
The present report is a follow-on benchmarking exercise, covering the same countries and parameters used in the earlier study, to measure India’s standing vis-à-vis twenty other countries, as well as the progress since the last exercise, across payment systems and payment instruments.
The rating has been done for each indicator considering countries for which data was available and only India has been rated. The rating categories are as follows:
a) “Leader”: ranked 1st or 2nd or 3rd;
b) “Strong”: in the top half of the countries other than the leaders;
c) “Moderate”: in the bottom half of countries other than the bottom 5; and
d) “Weak”: in the bottom
The highlights of the present exercise are as below:
India was categorized as a ‘leader’ or ‘strong’ in respect of 25 (21 in the previous exercise) out of 40 indicators and categorized as ‘weak’ in respect of 8 (12 in the previous exercise) indicators.
India has made significant progress and moved to a leadership position in large-value payment systems and fast payment systems, which contributed to rapid growth in digital payments.
Since the last exercise, India has demonstrated improvement in digital payment options available for bill payments, ticketing systems for public transportation, available channels for cross-border remittances, and a decline in cheque usage.
The exercise highlights that there is scope for improvement in acceptance infrastructure i.e. ATMs and PoS terminals. The Payments Infrastructure Development Fund (PIDF) scheme was operationalised in 2021 to enhance the acceptance infrastructure and bridge the gap.
The decline in India’s rating in some parameters involving currency in circulation is explained by the increased demand for cash as a store of value during the Covid-19 pandemic-related lockdown and the slowdown in economic growth during 2020.
“Reserve Bank of India (RBI) has relied on publicly available information and made all reasonable efforts to ensure that the information in the report is accurate”, the report said. It further said that “However, any changes in data/information pertaining to jurisdictions covered in the exercise, after the finalisation of the report, may not be reflected herein”.
Key Takeaways from Benchmarking Studies:
Progress in Digital Payments:
India has made substantial strides in digital payments, emerging as a leader or strong performer on 25 out of 40 indicators in a recent benchmarking exercise, up from 21 in 2019.
Strengths:
India excels in areas like regulation of payment system costs, ATM deployment, share of credit transfers, cross-remittances, and the availability of alternate payment systems. The growth of e-money, customer safety, and authentication standards also show strong performance.
Areas for Improvement:
India needs to enhance its infrastructure, particularly the spread of PoS terminals and ATMs, as well as improve mobile and broadband subscriptions. The share of cheques in payment systems also indicates an area for improvement.
Global Benchmarking:
The Reserve Bank of India (RBI) conducts regular benchmarking exercises to compare India’s payment systems against other major countries. These exercises help identify areas where India is leading and where improvements are needed.
UPI Dominance:
The Unified Payments Interface (UPI), a digital and real-time payment system, has become a dominant force in India’s digital payment landscape, accounting for 83% of the total payment volume by the end of 2024, according to the Payments System Report by the RBI.
In summary, India’s payment system is undergoing rapid evolution, with notable improvements in digital payments and specific areas of strength. However, further investments in infrastructure and addressing areas where India lags are crucial for continued progress and to fully realize the potential of digital payments in the country.
In summary, India’s payment system is undergoing rapid evolution, with notable improvements in digital payments and specific areas of strength. However, further investments in infrastructure and addressing areas where India lags are crucial for continued progress and to fully realize the potential of digital payments in the country.
Originally posted July 1, 2022. Edited and reposted on 11.05.2025
