RBI to establish “Digital Payments Index”

To assess and capture the extent of digitalization of payments effectively

• The Reserve Bank of India (RBI) has proposed the creation of a digital payments index (DPI) at the end of July 2020
• The index is on key operating parameters such as rural penetration and innovation in existing modes and channels
• The index will assess and capture the extent of digitalization of payments effectively on these parameters

Base highlights of Digital Payment Index

• The Reserve Bank shall construct and periodically publish a composite “Digital Payments Index” (DPI) to capture the extent of digitization of payments effectively
• The DPI would be based on multiple parameters and shall reflect accurately the penetration and deepening of various digital payment modes
• The DPI will be made available from July 2020 onwards” the central bank said in its statement on developmental and regulatory policies

Functional highlights of the Index

• The digital payment index will enable both consumers and stakeholders to gained informed insights on developments in infrastructure, access, demographic
• It will also enable acceptance related growth with reference to broader domestic and global standards in digital payments
• The index will have classification of urban, semi-urban and rural geographies to analyze the kind of digital payments that are gaining acceptance
• It will help understand the impact of any policy interventions taken by the regulator or government on digital payment services
• For instance, the government recently scrapped merchant discount rates (MDR) on payments made through Rupay debit cards and the Unified Payments Interface (UPI)
• The index will determine if the actions taken are helping in the growth of digital payments

What is “Self-Regulatory Organization (SRO)”?

• It is a non-governmental organization with the power to create and enforce standalone industry and professional regulations and standards
• Currently, the Payments Council of India (PCI) is the largest industry body that fulfils this role in India‟s digital payments industry

What is Merchant Discount Rates (MDR)?

• MDR is the cost paid by a merchant to a bank for accepting payment from their customers via digital means
• The merchant discount rate is expressed in percentage of the transaction amount
• It is also applicable for online transactions and QR-based transactions
• The amount that the merchant pays for every transaction gets distributed among three stakeholders
• The bank that enables the transaction, vendor that installs the point of sale (PoS) machine and the card network provider such as Visa, MasterCard, RuPay

What is “Payments Council of India (PCI)”?

• The Payments Council of India was formed under the aegis of IAMAI in the year 2013 catering to the needs of the digital payment industry
• The Council was formed inter-alia for the purposes of representing the various regulated non-banking payment industry players, to address and help resolve various industry level issues and barriers which require discussion and action
• The council works with all its members to promote payments industry growth and to support our national goal of „Cash to Less Cash Society‟ and „Growth of Financial Inclusion‟ which is also the Vision Shared by the RBI and Government of India

Pic courtesy : Livemint