After ‘requests’ from many countries, RBI may take payment system abroad
The Indian Express
14 June 2020
Written by: George Mathew
The central bank said
cross-country cooperation with Bhutan is already in place with CTS, NACH
and NEFT operational there as well. NEFT is available for one-way
transfers from India to Nepal.
After successfully implementing a low-cost payment system in the
country, the Reserve Bank of India (RBI) is exploring the possibility of
expanding its payment system abroad following “requests” from several
countries.
The central bank said “specific interests or requests are being
received” for implementing payment systems like CTS (cheque truncation
system), NEFT, UPI and messaging solutions by certain jurisdictions.
“There is scope for enhancing global outreach of our payment systems,
including remittance services, through active participation and
co-operation in international and regional fora by collaborating and
contributing to standard setting,” the RBI said in a note on ‘Oversight
framework for financial market infrastructures and retail payment
systems’.
Currently, there are no RBI authorised payment system operators
providing payment services outside India. “However, with the
availability of low cost innovative digital payment products in India,
many countries have expressed interest in partnering in this growth and
replicating our products based on their country specific requirements,”
the RBI said.
The central bank said cross-country cooperation with Bhutan is
already in place with CTS, NACH and NEFT operational there as well. NEFT
is available for one-way transfers from India to Nepal.
However, considering that efforts are being taken to increase and
widen the scope, coverage and usage of RuPay card scheme — developed by
NPCI — and UPI to enhance their brand value internationally, the risks
of such systems would also be high, the RBI said. The participants in a
domestic system might become dependent on the funds they are to receive
in an offshore system to fund their domestic debt position, leading to
possible liquidity risk issues, it said.
According to the RBI, this could also be on account of different time
zones and also due to lacking nature of suitable depth in the currency
markets of such economies, and more so in the event of financial
distress. In such cases, there would be a requirement for constant
cooperation with the concerned central banks and other regulatory
authorities.
The RBI also said cash, as a payment mode, is still important but it is
increasingly seen as a way to store value, more than to make payments.
“India’s growing use of retail digital payments, along with the radical
reconstruction of its cash economy, indicates a shift in the
relationship with cash. This is evidenced by the steep growth observed
in the retail digital payments,” it said.
The RBI said its study revealed that while currency in circulation
(CIC) across the country increased at a compounded annual growth of 10.2
per cent over the past 5 years, the CIC to GDP reduced from 11.6 per
cent in 2014-15 to 11.2 per cent in 2018-19. The cash withdrawals from
ATMs increased during the same period, but the percentage of cash
withdrawals to GDP was constant at around 17 per cent, it said.
Further, while the digital payments in the country have witnessed a
growth of 61 per cent and 19 per cent in terms of volume and value,
respectively, the value of digital payments to GDP has also increased
from 660 per cent in 2014-15 to 862 per cent in 2018-19. In addition,
the deployment of ATMs has grown at a low pace (4 per cent) and the PoS
terminals contrastingly grew at a high pace of 35 per cent, it said.
The parameters considered as indicative of cash payments are currency
in circulation (CIC), share of high value denominated currency and low
value denominated currency and cash withdrawals from ATMs, whereas
parameters used for assessing the level of digitisation were growth of
digital payments, digital payments to GDP and infrastructure, it said.
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