Reserve Bank of India introduces “e-Money” word in its report on ‘Benchmarking India’s Payment Systems’

          Reserve Bank of India released a report on “Benchmarking India’s Payment Systems” on Tuesday  i.e 4^th June 2019 in the late night.

e-Money is prepaid value stored electronically, which represents a liability

 of the e-money issuer (a bank, an e-money institution or any other entity

 authorised or allowed to issue e-money in the local jurisdiction) and which

 is denominated in a currency backed by an authority.

In India, Prepaid Payment Instruments issued as Wallets and Cards are included.

This report provides a comparative position of the payment system ecosystem in India relative to comparable payment systems and usage trends in other major countries.

Reserve Bank of India (RBI) has relied on publicly available information in this report.

Payment Systems have been rated on the basis of categories, which are as under:

(a) “Leader”: ranked 1st or 2nd or 3rd;

(b) “Strong”: in the top rungs of the countries other than the leaders (4th to 9th);

(c) “Moderate”: ranked in the middle (10th to 15th); and,

(d) “Weak”: in the lowest rungs (16th to 21st).

21 countries were selected for benchmarking India’s Payment Systems by Reserve Bank of India.  

These mix of 21 countries  (including advanced economy countries, Asian economies and BRICS (Brazil, Russia, India, China and South Africa) spread across all the continents where payment systems are considered robust, diverse and efficient.

The countries include Australia, Brazil, Canada, China, France, Germany, Hong Kong, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, Singapore, South Africa, South Korea, Sweden, Turkey, United Kingdom and the United States of America.

The Benchmarking report is first mentioned in the First Bi-monthly Monetary Policy Statement, 2019-20 announced on April 4, 2019 [Para 12(viii)], wherein it was stated that “Benchmarking India’s Payments Systems is necessary to gauge India’s progress vis-à-vis payment systems and instruments in major countries and give further impetus to the planned efforts for deepening the digitisation of payments. A report containing the findings of such an exercise will be placed on the RBI website by the end of May 2019.”

In line with the above statement, Reserve Bank of India placed the Benchmarking report on its website on 4^th  June, 2019.

The analysis was attempted under 41 indicators covering 21 broad areas including regulation, oversight, payment systems, payment instruments, payment infrastructure, utility payments, Government payments, customer protection and grievance redressal, securities settlement and clearing systems and cross border personal remittances.

The study found that India has a strong regulatory system and robust large value and retail payment systems which have contributed to the rapid growth in the volume of transactions in these payment systems.

There has been substantial growth in e-payments by Government and also in digital infrastructure in terms of mobile networks.

The report, however, notes that India is required to take further efforts to bring down the volume of paper clearing and increase acceptance infrastructure to enhance digital payments.

It may be mentioned that RBI’s current Vision Document on Payment and Settlement Systems in India has also, inter alia, identified the above areas for receiving its focussed attention.

As per the report:

India is a "leader" in regulating costs of payments systems, number of debit cards issued and automated teller machines, and oversight by the Central bank.

The country is "strong" in areas like having necessary laws and cash in circulation per capita.

The country has been found to be "weak" on a few parameters including decline of usage of cheques, share of card payments in payments systems and value of card payments to quantum of cash in circulation.

The 72-page report said that growth in the volume of payment systems transactions has been strong and steady in the country, but the decline in cheques usage has, however, been slow.

India ranks as a LEADER in the following indicators:

·      Regulation of costs of payment systems.

·      Features available in Cheque instruments.

·      Number of debit cards issued.

·      Number of ATMs deployed across the country.

·      Per capita cash withdrawal at ATMs.

·      Share of Credit Transfers in payment systems.

·      Availability of alternate payment systems.

·      Share of e-Money in payment systems.

·      Citizen to Government (C2G) e-payments; Business to Government (B2G) e-payments; Government to Business (G2B) e-payments.

·      Oversight by the Central Bank.

·      Cross border personal remittance flows.

India ranks STRONG in the following indicators:

·      Laws in place and scope of regulation.

·      Cash in Circulation per capita.

·      Number of Point of Sale (PoS) terminals deployed across the country.

·      Volume and growth of Credit Transfers Credit transfers.

·      Real Time Gross Settlement System (RTGS).

·      Fast payment systems available in the country Fast payments.

·      Volume and growth of e-Money.

·      Mobile and Broadband subscriptions.

·      Customer safety and Authentication Standards.

·      Ombudsman scheme for Complaints Redress.

·      Central counterparty is operational in the country.

India ranks MODERATE in the following indicators:

·      Cash in Circulation as a percentage of GDP.

·      Overall Payment Systems transactions volume and growth.

·      Value of payment systems transactions to cash in circulation Payment. Systems Transactions.

·      Number of credit cards issued.

·      Debit and Credit Card usage at PoS terminals and online.

·      Presence of domestic Card Network and its share.

·      Government e-payments in the country.

·      Regulation of Payment Aggregators.

·      Costs of cross border personal remittances.

India ranks WEAK in the following indicators:

·      Rate of decline of cheques.

·      Ratio of Cheque volume vs payment systems volume.

·      Share of debit and credit card payments in payment systems.

·      Number of people per PoS terminal.

·      Value of debit and credit card payments to cash in circulation.

·      Number of people per ATM; Ratio of ATM Withdrawal vs cash in circulation.

·      Volume and year on year growth of direct debits; Share of direct debits in payment systems.

·      Digital payment of utility bills; Public Mass Transportation systems in the country.

·      Availability of channels and operators for cross border personal remittances.