Digital Payments Growth Rises to 30.2% in FY21

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In the financial year that ended in March 2021, digital payments have recorded a growth of 30.19 percent, according to RBI data. The Digital Payments Index (RBI-DPI), which was recently constituted by the RBI, rose to 270.59 at the end of March 2021 from 207.84 a year ago. The sharp rise in the index indicates robust growth in digital transactions in India during the COVID-hit year. 


The RBI-DPI index has demonstrated significant growth in the index representing the rapid adoption and deepening of digital payments across the country in recent years, the RBI said. 

What is Digital Payment Index?

The index was started by the RBI to measure the digitization of payments across the country. The index was set as 100 for March 2018, which was taken as the base period, and it stood at 153.47 in March 2019.  In September 2020, the index rose to 217.74 and then saw a sharp rise to 270.59 in March 2021.


How does the RBI-DPI calculate the adoption of digital payments?


There are five broad parameters that the RBI digital payments index considers to measure the extent and depth of digital transactions in India. These parameters are:

Parameters of digital payment index by RBI

How are the Digital Payment Index parameters measured?

They have sub-parameters within them that are concretely quantifiable. For example, under ‘Payment Enablers’, the sub-parameters include new bank accounts opened, smartphone and internet adoption, and Aadhar card registrations among others. Taken together, these sub-parameters constitute 25% of the index. 

Table shows measurement of Digital Payment Index parameters

Source: Reserve Bank of India


Future of RBI’s Digital Payment Index

Going forward, the RBI will publish its Digital Payments Index twice a year, with a four-month lag for each report. Aside from a general estimate of digital adoption in India, the Index also helps the government keep track of the growth of a cashless economy. In the table below, the consistent growth of digital payments is evident:

table shows digital payments growth in India

In the past year, RBI has taken a slew of measures to promote digital payments in India. The limit for contactless transactions was increased from Rs. 2000 to Rs. 5000. RTGS transactions have also been made available 24×7 to enhance the digital payments infrastructure. 


The sharp rise in RBI’s digital payments index over the past year indicates rapid adoption of digital transactions following COVID-19. According to the Worldline India Digital Payments report, Universal Payments Index (UPI) transactions had an 82 percent jump in volume and a 99 percent jump in value in the second quarter of 2020-21, compared with the same quarter last year. 

In Q2 of last year, which ended in September 2020 and marked a gradual unlock after the first wave of the pandemic, over 51.8 lakhs POS terminals were deployed by merchant-acquiring banks. That number is 13 percent higher than the same quarter of the previous year. The sharp increase in digital payments infrastructure following the pandemic is captured by the sharp growth of the RBI-DPI index. 


Another industry that is influencing the growth of digital payments over the past year is the Buy Now Pay Later (BNPL) industry. According to a Research and Markets study, the BNPL industry in India is currently worth US$11.5 million and is projected to grow at a CAGR of 24.2% to US$52.8 million by 2028. The unprecedented rise in digital payments will help fuel the growth of digital BNPL services. 


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