The internationalisation of the unified payments interface (UPI) is progressing rapidly, as India emerges as a world leader in leveraging digital technologies for transformative change, according to a Reserve Bank of India (RBI) report.
The UPI hit a milestone of 16.6 billion transactions in a month in October, with improvements in its capabilities, including successful instant debit reversals at 86 per cent, up from 77 per cent in the same month last year.
“India’s UPI, an open-ended system that powers multiple bank accounts into a single mobile application of any participating bank, is propelling inter-bank peer-to-peer and person-to-merchant transactions seamlessly,” said RBI Deputy Governor Michael Debabrata Patra in the report.
According to Patra, innovations in the digital credit landscape, such as Account Aggregators, OCEN, and financial services on ONDC, have also contributed to productivity gains.
As of October 2024, ONDC operates in over 720 cities, with orders at 49.72 million. The Trade Receivables Discounting System (TReDS) addresses the credit gap of MSMEs, estimated at around Rs 52.2 trillion, by connecting them with banks and clients, leading to a reduction in funding costs by up to 2.5 percentage points.
“The value of invoices financed through TReDS has surged more than 23 times. As of October 2024, around 5,000 active FinTechs are involved in providing various financial and technical solutions to businesses, including MSMEs, helping businesses improve their operational management and enhance supply chain financing,” wrote Patra.
Around 40 per cent of the rural population and 78 per cent of the 20-30 years age group in the overall population use the internet in India. Approximately one-third of households engage in online purchases of consumables and services, one-fourth in buying consumer durables, and nearly one-tenth in food purchases.
The rising importance of embedded financing is reflected in its share of FinTech funding, which has grown from two per cent in 2020 to nine per cent in October 2024, wrote Patra.
Taking these developments into account, a summary measure of digitalisation for India has been constructed using a dynamic factor model (DFM).
“The index has been rising, reflecting the ongoing digital revolution. The spread of digitalisation has spurred research on assessing the effects of digitalisation on the economy and the transmission of monetary policy,” said Patra.
India is uniquely positioned to unlock new growth avenues and optimise existing ones with its digital public infrastructure (DPI), a vibrant information technology (IT) sector, and a burgeoning youth population, including one of the largest AI talent bases, noted the RBI Deputy Governor.
(Inputs from IANS)
