RBI to use Nandan Nilekani formula to measure digital payments success; says, India must catch up

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A pedestrian walks past the RBI building in Mumbai. (Bloomberg image)

With Digital India being one of the Prime Minister Narendra Modi-led government’s flagship schemes, RBI has decided to assess the extent of digital penetration in the country and is in the process of constructing a digital payment index. The index will also assess innovation in existing modes and will help bridge digital divide, T Rabi Sankar, Executive Director, RBI, said while addressing a webinar organised by the US-India Business Council. While he said that there has been an increase in the adoption of digital payments in India, there is still a lot of catching up to do as per-capita penetration is still quite low.

“RBI is in the process of…constructing and periodically publishing a composite digital payment index (DPI) to capture the extent of digitisation,” he said. The government hopes that the DPI will help it to accurately measure the deepening and penetration of digital payments across the country. Earlier, a Nandan Nilekani headed high-level committee had also recommended setting up of a comprehensive index to measure the extent of payment in India. In February, the apex bank had said that the DPI would be based on multiple parameters and shall reflect the penetration and deepening of various digital payment modes. Digital payments got a major push in 2016 after PM Modi’s demonetisation move in November 2016. T Rabi Sankar said that financial inclusion is well recognised as a key driver of economic growth.

Stating that access to formal finance will not merely boost jobs and economic resilience, T Ravi Sankar said that it may also lead to reduction in poverty and economic inequality when half of the Indian population in the emerging economies is still financially excluded. Digital technologies offer most-effective channel to deliver finance to these underserved population, he added.