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E-payments have not penetrated deep enough, says Subbarao

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Says value of bank notes, coins in circulation is a high 12% of GDP

RBI Governor, D. Subbarao…Only a small fraction of the over 10 million retailers in India have card payment infrastructure. — P. V. Sivakumar
RBI Governor, D. Subbarao…Only a small fraction of the over 10 million retailers in India have card payment infrastructure. — P. V. Sivakumar

RBI Governor D. Subbarao said India needs to proactively shift from cash to electronic payment systems.

“Large value payments have mostly shifted to the electronic mode, possibly because of the regulatory fiat. Disappointingly, retail payment systems continue to be paper-centric and electronic systems have not penetrated deep enough,” he said at the IDBRT Banking Technology Awards function here on Friday.

When compared with other emerging markets such as Brazil, Mexico and Russia, the value of bank notes and coins in circulation in India is high, at 12 per cent of GDP.

The number of non-cash transactions per person in India stands at just six per year, which again is “very low” in comparison with other emerging economies.

The RBI chief said that in proportional terms, India has one of the lowest numbers of ATMs and PoS (Point of Sale) terminals — 63 ATMs and 497 PoS terminals per million population.

Only a small fraction of the over 10 million retailers in India have card payment infrastructure.

“Though the usage of mobile banking and Internet banking is growing, a significant percentage of customers is not covered,” he pointed out.

Subbarao felt that limited product innovation is one factor behind the “tepid growth” of retail payment systems.

While the private non-bank entities, including mobile network operators, have introduced prepaid payment instruments, including mobile wallets, the market is yet to deepen.

In this context, he asked: “Are banks taking the easy way out by being content with the measures initiated by the regulator, rather than leading the effort towards electronification of payments?”

He said the central bank was now focussing on graduating to the next-generation RTGS (Real Time Gross Settlement) system with enhanced liquidity saving features and fast and higher processing capabilities.

The RBI introduced the RTGS system in March 2004 for settling gross inter-bank and customer transactions of values over Rs 2 lakh.

The gross daily turnover on the RTGS system has risen 500 times from Rs 500 crore then to Rs 2.5 lakh crore today.

amitmitra@thehindu.co.in

(This article was published in the Business Line print edition dated August 4, 2012)
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