Expanding and Deepening of Digital Payments Ecosystem

The Reserve Bank of India (“RBI”) on October 7, 2019 issued a notification FIDD.CO.LBS.BC.No.13/02.01.001/2019-20 (“the notification”) with the view of expanding and deepening the use of digital payments in India. This has been done to expand the use of digital payments by identifying one district in a state which would facilitate in providing infrastructure and all necessary requirements in making that the states or the Union territories are 100% digitally enabled. The district shall be identified in consultation with state/union territory level bankers committees (“SLBCs/ UTLBCs“) and it would be overseen by a bank which has relevant footholding in that state. The RBI would be in close consultation which such banks through quarterly reports being submitted to its regional or sub-offices. The goal of the RBI through this programme is to make a district 100% digitally enabled within 1 (one) year. The identifying of such districts will help in focusing on more individuals to enable them to use digital payments networks and to enhance the use of safe, secure and convenient digital payments. The process of transforming digital payments is in lieu of the ‘transformation of aspirational districts’ programme introduced by the Government of India which aims in focusing on 30 most underdeveloped districts in the country in the aspects of education, financial resources, water and infrastructure development. The notification also mentioned that any literacy regarding digital payments would also be facilitated by the banks overseeing a particular district. The allocation of such identified districts shall be made with mutual consultation and the voluntary acceptance of the banks in such districts. The need of building a digital financial infrastructure is high among small districts in states such as Uttar Pradesh, Bihar, Rajasthan. Earlier this year in May, there was also a Report of the High Level Committee on Deepening of Digital Payments (the report) published. The report mentions the establishment of a digital financial inclusion index to assess the progress of an area and measuring, through a common scale, the evolution of users and to remove any imbalance in the same. India is a diverse country with far reaching territories and such a step by step process initiated by the RBI is a move forward in achieving 100% digitally facilitated financial transactions.