A Reserve Bank of India-appointed committee, headed by Nandan Nilekani, has said that digital payments have grown 10-fold over five years and has set a target for additional growth of 10x in three years.

This, according to the panel, will be driven by a major shift from high-value, low-volumeand high-cost transactions to low-value, high-volume and low-cost transactions, thus leading to a decline in cash requirements.

Cash is king

The report added that while digital payments have steadily become a significant mode for inflow to the Indian consumer via government benefit payments and salaries in the organised sector, cash is still the dominant mode because of the underdeveloped nature of the acceptance ecosystem for digital payments. In its report ‘Deepening Digital Payments in India’, the committee has noted the need to address this gap between the “digital credits” the Indian consumer gets and the “digital debits” the Indian consumer needs to increase overall digital payments in the country.

Additionally, the unorganised sector continues to depend on cash for both their credits and debits.

Govt role

The committee has also recommended that the government, being the single largest participant in payments, should take the lead on all aspects of digitisation of payments and stresses the usage of NCMC (national common mobility card).

The committee further recommended reducing the overall cost to the consumer such as service charges for digital payments, and increasing consumer confidence in digital transactions.

Card usage

To promote card transactions, the committee had recommended that the regulator should adjust the interchange rate and let the market compete with MDR (merchant discount rate), ultimately growing the acceptance ecosystem rather than inhibiting it.

“We support macro recommendations to shift focus from issuance to merchant acquisition and simplified KYC for wallets. Target of 10x growth in three years is definitely achievable if all these recommendations are implemented in a time-bound fashion,” said Navin Surya, Chairman Emeritus, Payments Council of India.

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