Digital payments record 29% annual growth during FY 2021-22
The Reserve Bank of India’s (RBI) digital payments index (DPI) rose to 349.30 in March 2022 from 270.59 in March 2021fuelled by India’s unified payments interface (UPI).
The DPI index was launched in January 2021 which shows the rapid adoption and deepening of digital payments across the country in recent years. The central bank had developed the composite Reserve Bank of India (RBI) – Digital Payments Index (RBI-DPI) with March 2018 as the base year to assess the extent of digitisation of payments in the country. RBI has said the index will be published on a semi-annual basis with a lag of 4 months.
The DPI index comprises five broad parameters that enable the measurement of deepening and penetration of digital payments in the country over different time periods. The parameters are:
payment enablers, with a weightage of 25% in the index
demand-side and supply-side payment infrastructure factors, with a weightage of 10% each
payment performance, with 45% weightage
consumer centricity, with 5% weightage.
Each of the parameters have sub-parameters which, in turn, consist of various measurable indicators.
According to the RBI annual report, large value corporate transactions have increased owing to an increase in economic activity post covid which contributed to growth of digital transactions during 2021-22.
Among the digital mode of payments:-
Real Time Gross Settlement (RTGS) to increase by 30.5% and 21.8% in volume and value respectively.
National Electronic Funds Transfer (NEFT) system also witnessed an increase of 30.6% and 14.3% in volume and value respectively.
Credit cards increased by 27% and 54.3% in terms of volume and value respectively. Debit cards decreased by 1.9% in volume and increased by 10.4% in terms of value.
Prepaid Payment Instruments (PPIs) recorded a 32.3% increase in volume and 48.5% increase in value terms.
In FY22, UPI processed more than 46 billion transactions amounting to over Rs 84.17 trillion, breaching the $1 trillion-mark. Both volume and value of transactions doubled in a year’s time, indicating the meteoric rise in the adoption of digital payments in the country.
Credit demand outpaces deposit growth for India banks
Increase in economic activity post covid has driven credit growth in India to a 3 year high of 14.4% in the fortnight to July 1st from a record low of 5.6% in FY21. However, growth in bank deposits have failed to catch up with most people choosing to park their money into shares and mutual funds in search of better returns. could send banks scurrying for funds. Indian banks’ deposit growth, currently at 9.8%, has stayed in single digits over the past 14 months. As surplus funds in the system get slowly pulled out by the central bank measures, banks’ margins and their profitability could come under pressure, forcing them to not just raise deposit rates, but also possibly go to the more expensive capital markets to raise funds needed to meet credit demand.
The Insurance Regulatory and Development Authority (IRDAI) during the regulator’s board meeting has made important changes to rules governing sales, investments and commissions charged by insurance companies as part of the ongoing deregulation agenda. According to the IRDAI chairman, the new rule has focussed on lightening regulations, giving companies more decision making powers and removing old laws.
Key regulatory decision include:
Allowing banks to sell insurance policies of up to nine insurance companies, the biggest distribution reform since the regulator allowed corporate agents like banks to sell policies from three insurance companies as part of the open architecture policy implemented since April 2016.
To allow insurance companies to tap fund raising options, like through the debt market, without prior approval from the Irdai.
To make changes in how commissions are calculated. So far, each product had an Irdai mandated cap on commissions. That is now proposed to be changed with the regulator now suggesting that companies can tweak commissions on products as long as they adhere to a comprehensive cap on all commissions.
A framework platforms providing execution-only services in direct plans offered by mutual funds by SEBI
SEBI proposed a separate framework for platforms providing execution-only services in direct plans offered by mutual funds to improve the penetration of MFs and to ensure that ease of investment comes with adequate investor protection and grievance redressal mechanism. Assets Management Companies (AMCs) provide a separate plan for direct investments which are not routed through a distributor. According to this proposal, an entity desirous of providing execution-only services (EOP) in direct plans of mutual funds may be mandated to act as a registered intermediary, as an entity registered with industry body Association of Mutual Funds in India (AMFI) or as an entity with limited purpose membership with stock exchanges.
