Digitalisation has helped scheduled commercial banks (SCBs) make productivity gains, including 25-30 per cent decline in customer acquisition costs, shortening account opening time to less than a day, saving of four lakh litres of fuel in commutes to banks by customers, and 40 per cent reduction in customer wait times at branches, said RBI Deputy Governor Michael D Patra.

Referring to an AI-assisted review of the latest annual reports of banks, which revealed various instances of productivity gains by SCBs, Patra underscored that the gains also include monthly savings of 14,500 person-days, reduction of the use of 84 tons of paper, and 50 per cent reduction in the compliance monitoring time.

Aadhaar – India’s unique identification number – has halved the cost of conducting the Know Your Customer (KYC) process in India, the Deputy Governor said in his inaugural address at the DEPR Conference on ‘Digital Technology, Productivity and Economic Growth in India’ at Jaipur.

Patra noted that micro-level evidence from surveys of banks shows that while all of them have implemented mobile and internet banking, 75 per cent offer online account opening, digital KYC, and digitally enabled doorstep banking.

Additionally, 60 per cent provide digital lending, 50 per cent offer payment aggregator services, 41 per cent use chatbots, 24 per cent have adopted open banking, and 10 per cent have integrated Internet of Things (IoT) technology. Private sector banks are leading this technology adoption.

On digitalisation of finance, the Deputy Governor emphasised that the Unified Payments Interface (UPI) hit a milestone of 16.6 billion transactions in a month, in October 2024, with improvements in its capabilities like successful instant debit reversals at 86 per cent (77 per cent in the same month last year).

Innovations in the digital credit landscape such as Account Aggregators, OCEN (Open Credit Enablement Network), and financial services on ONDC (Open Network for Digital Commerce) have also contributed to productivity gains, he added.

As of March 2024, ONDC operates in over 720 cities, with orders at 49.72 million.

TreDS

Patra observed that the Trade Receivables Discounting System (TReDS) addresses the credit gap of MSMEs estimated at around ₹52.2 trillion by connecting them with banks, and clients, with a reduction in funding costs up to 2.5 percentage points.

The value of invoices financed through TReDS have surged more than 23 times.

The Deputy Governor said as of October 2024, around 5,000 active FinTechs are involved in providing various financial and technical solutions to businesses, including MSMEs, helping businesses better manage their operations and improve supply chain finance.

Digitalisation and public services

Patra highlighted that digitalisation is transforming the efficiency of public services. Referring to RBI staff estimates, he said in 2024, the average number of daily e-transactions to access public services has increased by 56 per cent (year-on-year).

During 2023-24, ₹6.9 lakh crore has been transferred through the digitally powered Direct Benefit Transfers (DBT) under 314 schemes benefiting 176 crore beneficiaries. Over the years, these DBTs have resulted in estimated cumulative cost savings of ₹3.5 lakh crore up to March 2023

“The overall approach has been to balance risk mitigation and financial innovation, maintaining clear communication with stakeholders, and adapting supervisory processes.

“Five policy priorities drive the Reserve Bank’s engagement: digital financial inclusion; digital public infrastructure (DPI); customer protection and cyber security; sustainable finance; and global integration and cooperation,” Patra said.

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