The Reserve Bank of India (RBI), in its annual report for FY23, said that digital transformations were responsible for India's post-pandemic resilience. It said that India saw massive growth in total digital payments during the pandemic and after the pandemic period. Transactions routed through digital modes recorded a marked expansion in 2022-23 over and above the strong growth witnessed a year ago.
"In 2022-23, total digital payments recorded growth of 57.8 per cent and 19.2 per cent in volume and value terms, respectively, on top of growth of 63.8 per cent and 23.1 per cent, respectively, in the previous year," the annual report said, which was released today.
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It added that India outpaced other nations to emerge as the largest player in real-time transactions at the global level, with a 46 per cent share in 2022.
"The strong penetration and growth in Unified Payments Interface (UPI) were buoyed by rapid merchant onboarding, growing digital awareness and policy thrust on continuous enhancements in the scope and reach of payment systems," the report further said.
UPI and UPI Lite
The report highlighted that the central bank released the Payments Vision 2025 in the last fiscal with the theme 'E-Payments for Everyone, Everywhere, Everytime', which focussed on further elevating India’s payment systems to empower every user with safe, secure, reliable, accessible, affordable and efficient payment options.
The RBI introduced many new streams in payment systems to enrich functionalities and onboard consumers on the digital journey.
Listing the additions, the report said: "The UPI Lite was introduced to facilitate small value transactions in offline mode using UPI through an on-device wallet. Linking of RuPay credit cards to UPI was permitted to deepen usage by broadening the financial products linked for payment processing. Introduction of single block multiple debits in UPI enhanced the capabilities for merchant payments."
The central bank also extended the reach of UPI to non-resident Indians and foreign nationals in a bid to ease merchant payments.
"The linking of UPI with PayNow of Singapore helped facilitate low-cost fund transfers and remittances between the two countries. The scope of the Bharat Bill Payment System (BBPS) was expanded to include all categories of payments and collections. BBPS was also extended to provide a standardised bill payment experience to NRIs," the report added.
For the current fiscal FY24, the central bank said it aims at expanding the ongoing pilots in the CBDC (central bank digital currency) -- Retail and CBDC-Wholesale -- by incorporating various use cases and features.
On Monday, a PwC India report said that UPI transactions are likely to reach 1 billion per day by 2026-27, accounting for 90 per cent of the retail digital payments in the country.
UPI accounted for approximately 75 per cent of the total transaction volume in the retail segment during the period of 2022-23, the PwC India, The Indian Payments Handbook – 2022-27, stated.
Indian economy and future outlook
The report added that on the back of sound macroeconomic policies and softer commodity prices, India's growth momentum is likely to be sustained in 2023-24 in an atmosphere of easing inflationary pressures.
The annual report, however, further said that slowing global growth, protracted geopolitical tensions and a possible upsurge in financial market volatility following new stress events in the global financial system could pose downside risks to growth.
"On the back of sound macroeconomic policies, softer commodity prices, a robust financial sector, a healthy corporate sector, continued fiscal policy thrust on quality of government expenditure, and new growth opportunities stemming from global realignment of supply chains, India's growth momentum is likely to be sustained in 2023-24 in an atmosphere of easing inflationary pressures," it said.
Risks to inflation have eased with downward corrections in global commodity and food prices and easing of the pass-through from high input cost pressures of last year, it added.
The RBI's Annual Report for 2022-23, which is a statutory report of its Central Board of Directors, further highlighted its monetary policy remains focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth.
"With a stable exchange rate and a normal monsoon -- unless an El Nino event strikes -- the inflation trajectory is expected to move down over 2023-24, with headline inflation edging down to 5.2 per cent from the average level of 6.7 per cent recorded last year," the report said.
The central bank has raised the policy repo rate by 250 basis points in the last one year. The report said the RBI will also steer the disinflationary process, along with supply-side measures to address transient demand-supply mismatch due to food and energy shocks.
“Monetary policy remains focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth,” it added.
It is to be noted that the RBI introduced its Central Bank Digital Currency (CBDC) in phases during the year, with the launch of pilots for the Digital Rupee in the wholesale and retail segments on November 1, 2022, and December 1, 2022, respectively.
The pilots were preceded by the issuance of a ‘Concept Note’ on CBDC to create awareness about CBDCs in general and the planned features of e-Rupee in particular.
(With agency inputs)