The Reserve Bank of India (RBI) and the government must target growth in the volume of digital payments by a factor of 10 in three years, leading to doubling in value relative to gross domestic product (GDP), said the Nandan Nilekani-led committee on deepening of digital payments. This growth will be driven by a shift from high-value, low-volume, high-cost transactions to low-value, high-volume, low-cost transactions, the panel noted.
The RBI constituted the five-member committee in January to review the status of digitization of payments, identify gaps in the ecosystem, and suggest ways of plugging them. It was tasked to suggest a medium-term strategy for deepening digital payments and measures to strengthen safety and security.
Per capita digital transactions stand at 22 in March 2019 and are expected to increase to 220 by March 2022, according to the committee. This will lead to an increase in the number of users of digital transactions from 100 million to 300 million. At present, India has a large currency in circulation to GDP ratio, when compared with other countries.
The Nilekani committee also highlighted the need to expand the acceptance infrastructure across the country and also to reduce the interchange on card payments by 15 basis points.
The panel has also pushed for removal of all charges on digital payment transactions for the convenience of customers.
“Keeping in mind that digital transactions result in larger balances with the bank, the committee is of the view that customers must be allowed to initiate and accept a reasonable number of digital payment transactions with no charges. Banks have traditionally allowed transactions at branches, ATMs, and through net banking with no fees, seeing it as a part of servicing the customer. That same approach must be used with digital transactions," the report said.
The committee has also made recommendations to the National Payment Council of India to allow digital payments systems such as RuPay and BHIM UPI in other countries to facilitate easy remittance to India.
There is also a need to provide citizens with the option to pay digitally for all payments to government and public sector agencies, the panel said.
“Citizens should have a choice of online payment instruments and these should not be limited to only net banking options and all options such as card payments and UPI should be facilitated. For instance, in GSTN all card payments should also be enabled at the earliest, besides other electronic payment options. As electronic receipts will result in significant savings to the government by way of faster collection of funds, the government must lead by example, and pay for these services without passing them to the consumers in the form of convenience fees," said the report.
The government should continue the current scheme to refund the merchant discount rate for small value transactions (under ₹2,000) beyond December 2019 for another two years, the committee said.
The panel also recommended the creation of a No-KYC wallet with a maximum value of ₹2,000 in the wallet and maximum spending capped at ₹10,000 per month, with the aim of boosting digital payments.