RBI's DPI to track reach of digitisation of payments in India by July

The Reserve Bank of India on Thursday said it would launch by July a Digital Payments Index (DPI) to capture the extent of digitisation of payments in the country.

“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,” the banking regulator said in its statement on developmental and regulatory policies. 

The index, according to people in the know, will help the regulator understand the impact and spread of digital payments in rural, urban, and semi-urban areas, as well as understanding the impact of policy decisions made by the RBI. 

For instance, the apex bank recently scrapped merchant discount rate (MDR) on Unified Payments Interface (UPI) transactions. MDR is the fees paid by a merchant to a bank for accepting payment from their customers via cards or UPI.

Finance Minister Nirmala Sitharaman had said in her Budget speech that no charge would be levied on UPI and RuPay transactions. There have been reports that MDR may be scrapped on all debit card transactions.

It also said a self-regulatory organisation (SRO) would be set up for “orderly operations in the payment system”. And SRO will be set up by April for digital payment system for “fostering best practices on security, customer protection and pricing, among others. The SRO will serve as a two-way communication channel between the players and the regulator/supervisor,” the RBI said in a statement. 

To promote digital banking in rural areas, regional rural banks (RRBs) will now be allowed to act as merchant acquiring banks using Aadhaar Pay, the BHIM app and point of sale (PoS) terminals.

The RRBs will be allowed to deploy their own devices if they have permission for mobile banking from the RBI, and should fulfill other criteria specified by the regulator. 

“The bank’s IT systems and CBS (core banking system) should have been subjected to an IS (information system) audit not earlier than six months from the date of application to confirm that the system is adequately secure,” it said. 

In addition, the RRB must ensure necessary infrastructure for application development, safety and security of the transactions and handling of customer grievance, and a customer grievance redressal should be in place.  The RRB should have had a net worth of Rs 100 crore or more as of March 31 of the preceding financial year, and other criteria specified by the RBI. 

The RBI said the RRB should have a board approved policy on merchant acquisition for card transactions and no penalty should have been imposed on it in last two financial years.