After‘requests’ from many countries, RBI may take payment system abroad
AFTER SUCCESSFULLY imple-
menting a low-cost payment
system in the country, the
ReserveBankofIndia(RBI)isex-
ploring the possibility of ex-
panding its payment system
abroad following “requests”
fromseveral countries.
Thecentralbanksaid“specific
interestsorrequestsarebeingre-
ceived” for implementing pay-
ment systems like CTS (cheque
truncationsystem),NEFT,UPIand
messaging solutions by certain
jurisdictions. “There is scope for
enhancingglobaloutreachofour
payment systems, including re-
mittanceservices,throughactive
participationandco-operationin
internationalandregionalforaby
collaboratingandcontributingto
standard setting,” theRBI saidin
a note on ‘Oversightframework
for financial market infrastruc-
tures and retail payment sys-
tems’.
Currently,therearenoRBIau-
thorisedpaymentsystemopera-
tors providing payment services
outsideIndia.“However,withthe
availabilityoflowcost innovative
digitalpaymentproductsinIndia,
many countries have expressed
interest in partnering in this
growthandreplicatingourprod-
ucts based on their country spe-
cificrequirements,” theRBI said.
The central bank said cross-
countrycooperationwithBhutan
isalreadyinplacewithCTS,NACH
and NEFT operational there as
well. NEFT is available for one-
waytransfersfromIndiatoNepal.
However, considering that ef-
forts are being taken to increase
andwidenthescope,coverageand
usageofRuPaycardscheme—de-
velopedbyNPCI— andUPItoen-
hance their brand value interna-
tionally,therisks of such systems
would also be high,the RBI said.
Theparticipantsinadomesticsys-
temmightbecomedependenton
thefundstheyaretoreceive inan
offshore system to fundtheirdo-
mestic debt position, leading to
possibleliquidityriskissues,itsaid.
According to the RBI, this
couldalsobeonaccountofdiffer-
ent time zones and also due to
lacking nature of suitable depth
in the currency markets of such
economies, and more so in the
eventof financialdistress.Insuch
cases,there would be a require-
ment for constant cooperation
withtheconcernedcentralbanks
andother regulatory authorities.
The RBI also said cash, as a
paymentmode,isstillimportant
butitisincreasinglyseenasaway
tostorevalue,morethantomake
payments.“India’sgrowinguseof
retail digital payments, along
withtheradicalreconstructionof
itscasheconomy,indicatesashift
intherelationshipwithcash.This
isevidencedbythesteepgrowth
observedintheretaildigitalpay-
ments,” it said.
TheRBIsaiditsstudyrevealed
thatwhilecurrencyincirculation
(CIC)acrossthecountryincreased
atacompoundedannualgrowth
of 10.2 per cent over the past 5
years, the CIC to GDP reduced
from 11.6 per centin 2014-15 to
11.2percentin2018-19.Thecash
withdrawals from ATMs in-
creased during the same period,
butthepercentage of cashwith-
drawals to GDP was constant at
around17percent,it said.
Further,whilethedigitalpay-
ments in the country have wit-
nessedagrowth of 61 per cent
and 19 per centin terms of vol-
ume and value, respectively, the
valueofdigitalpayments toGDP
has also increased from 660 per
centin2014-15to862percent in
2018-19.Inaddition,thedeploy-
mentofATMshasgrownatalow
pace(4percent)andthePoS ter-
minals contrastingly grew at a
highpaceof35percent,it said.
The parameters considered
asindicativeofcashpaymentsare
currency in circulation (CIC),
shareofhighvaluedenominated
currencyandlow valuedenomi-
nated currency and cash with-
drawalsfromATMs,whereaspa-
rameters used for assessing the
level of digitisationweregrowth
of digital payments, digital pay-
mentstoGDPandinfrastructure,
it said.
Possiblity of Liquidity risk remains : MANY COUNTRIES that are attracted by the low-cost
innovative digital payment products in India have expressed
interest inreplicating India’sproductsbasedon theircountry
specificrequirements.
However,therisksof suchsystemswouldalsobehigh.
Theparticipants inadomesticsystemmightbecome
dependentonoverseasfundstofundtheirdomesticdebt
position,leadingtopossibleliquidityriskissues.
