Unified Payments Interface (UPI)-led digital retail payments grew at a compounded annual growth rate (CAGR) of 50 per cent in the last five years, the Reserve Bank of India (RBI) said in its annual report 2022-23 on Tuesday.
There is also a decline in the share of low denomination notes, partly due to the substitution of small-value payments by the UPI and mobile wallets. Further, currency in circulation (CIC) to gross domestic product (GDP) stood at 13.4 per cent.
Retail digital transaction has grown exponentially in the last five years, surpassing major developed economy like the US, the UK, and Europe. "In India, while the UPI-led retail digital payments grew at a compounded annual growth rate (CAGR) of 50 per cent and 27 per cent in terms of volume and value, respectively (during 2016-17 to 2021-22), the currency in circulation (CIC) to GDP ratio also rose and peaked at 14.4 per cent in 2020- 21." RBI wrote.
The report further adds that the persistent affinity for cash has been attributed to factors such as the decline in opportunity costs of holding currency, i.e., interest rates, precautionary holdings amid uncertainty, presence of a large informal economy and direct benefit transfers (DBTs) by the government, promoting both cash and digital modes, as routing of benefits digitally tends to be followed by cash withdrawals.
According to the report, there was a decline in the share of low denomination notes, partly due to the substitution of small value payments by the UPI and mobile wallets, corroborated by their narrowing ticket sizes. Lower transactional cash demand was also evident from the sharper decline in the number of cash withdrawals at ATMs than in the withdrawal values, leading to increased withdrawal sizes.
More Rs 20 & Rs 500 Fake Notes In Circulation
During 2022-23, out of the total Fake Indian Currency Notes (FICNs) detected in the banking sector, 4.6 per cent were detected at the Reserve Bank and 95.4 per cent at other banks.
Compared to the previous year, there was an increase of 8.4 per cent and 14.4 per cent in the counterfeit notes detected in the denominations of `20 and `500 (new design), respectively. On the other hand, the fake notes detected in the denominations of Rs 10, Rs 100 and Rs 2,000 declined by 11.6 per cent, 14.7 per cent and 27.9 per cent, respectively.
Foreign Portfolio Investment (FPI) flows remained volatile during the year. FPIs made net sales of Rs 43,943 crore in the Indian equity market during 2022-23 compared to net sales of Rs 1.3 lakh crore in the previous financial year. Flows from mutual funds, however, remained supportive. Mutual funds made net purchases of Rs 1.7 lakh crore on Indian stock exchanges in 2022-23. The ownership of FPIs in Indian equities (NSE-listed companies) has been declining from the peak share of 23.3 per cent in March 2015 to 20.6 per cent by end-March 2023 as domestic institutional investors (DII) inflows have outpaced FPI inflows. The share of domestic institutional investors (including domestic mutual funds, insurance companies and pension funds) in market capitalisation of Indian equities increased further to 16.4 per cent at end-March 2023 from 13.7 per cent at end-March 2022. The share of retail and high net-worth individuals in Indian equities, however, moderated to 9.4 per cent at end-March 2023 from 9.6 per cent at end-March 2022.
Among the digital modes of payments, the number of transactions using the RTGS system increased by 16.7 per cent during 2022-23. In terms of value, RTGS transactions registered an increase of 16.5 per cent; transactions through the National Electronic Funds Transfer (NEFT) system also witnessed an increase of 30.8 per cent and 17.4 per cent in volume and value, respectively, reflective of the increase in large value corporate transactions, in line with rising economic activity. As of end-March 2023, RTGS services were available through 1,65,390 IFSCs2 of 243 members, while NEFT services were available through 1,66,544 IFSCs of 230 member banks.
During 2022-23, payment transactions carried out through credit cards increased by 30.1 per cent and 47.3 per cent in terms of volume and value, respectively (Table IX.1). Transactions through debit cards decreased by 13.2 per cent in terms of volume and 1.4 per cent in terms of value. Prepaid Payment Instruments (PPIs) recorded an increase in volume and value by 13.5 per cent and 2.9 per cent, respectively. The growth in digital payments can be attributed to the increased availability of acceptance infrastructure, which witnessed substantial growth during the year, benefitting from the Payments Infrastructure Development Fund (PIDF) scheme, operationalised in January 2021. The number of Points of Sale (PoS) terminals increased by 28.3 per cent to 77.9 lakh at the end of March 2023, while the number of Bharat Quick Response (BQR) codes deployed increased by 6.7 per cent to 53.8 lakh during the same period. Further, UPI QR increased by 48.4 per cent to 25.64 crore at end-March 2023.
Financial Inclusion
Under the financial inclusion initiatives, 12 public sectors and one private sector bank were responsible for covering 760 districts across the country at the end of March 2023. The key objective of the National Strategy for Financial Inclusion (NSFI) 2019-2024 has been fully achieved in 26 states and seven union territories (UTs), covering 99.96 per cent of the country's identified villages as on March 31, 2023, says the report.
At the same time, 182 districts have been identified for turning them into 100 per cent digital. Of these, 87 were fully digitally enabled at the end of 2023.
Other Initiatives Taken To Safeguard Consumer
In September 2022, RBI issued a circular to allow foreign remittance (received under Rupee Drawing Arrangement) to the bank account (know your customer (KYC) compliant) of the beneficiary through the Bharat Bill Payment System (BBPS), subject to conditions. This was done to make it easy for the Non-Resident Indians (NRIs) to pay utilities and other bills on behalf of their families in India.
In November 2023, the RBI initiated the country-wide financial awareness programme for connecting people, particularly in rural and semi-urban areas, to inform them about consumer rights to protect their interests and safeguard them against digital financial transaction frauds.
In January 2023, RBI extended the locker renewal date to December 31, 2023, to ease the process for the customers and banks. In addition, it has set phased completion of the process-50 per cent by June 30, 2023, 75 per cent by September 30, and 100 per cent by December 31, 2023.
RBI has advised banks to facilitate the customers to renew the locker agreements. If the lockers had been frozen by January 1, 2023, due to the non-execution of the renewal agreement, they are asked to unfreeze them immediately.
To protect the consumer's interest and streamline the operation of the banks and credit card-issuing non-banking financial companies (NBFCs), RBI issued a "master direction" for credit and debit card issuance and conduct. This would help resolve billing issues, credit transaction adjustments, mis-selling, cobranded arrangements, etc.
