Report on Currency and Finance (RCF) for 2023-24

Context

In the Report on Currency and Finance (RCF) for 2023-24, the RBI stated that digitalisation-induced changes in the behaviour of consumers and financial intermediaries can have implications for monetary policy.

About

• India’s digital bills marketplace is one of the quickest-developing within the international. 
• As of 2023, the market size is expected to be around $3 trillion, reflecting a compound annual growth rate (CAGR) of about 27% from 2018. 
• Growth Enablers: The surge in digital payment adoption can be attributed to various projects and reforms added through the authorities and the non-public quarter.
  • The Unified Payments Interface (UPI), a real-time payment system developed via the National Payments Corporation of India (NPCI), has been a game-changer. 
  • The UPI has seen a tenfold growth in extent over the past 4 years, increasing from 12.5 billion transactions in 2019-20 to 131 billion transactions in 2023-24 – 80 percent of all digital payment volumes. 
  • Other digital payment modes including mobile wallets, net banking, and card payments are also contributing significantly to this growth.
• Significance: Digitalisation can offer a strong enhancement to India’s external trade in goods and services.
  • Digitalisation in international payment systems has the potential to lessen the value of receiving remittances, thereby leading to better remittances and income or financial savings for the recipients.

Concerns

• Digitalisation growth concerns related to impulsive spending, herd behaviour and data safety.
• Digital systems permit brief dissemination of financial trends and choices, allowing statistics about investments, spending habits, and financial products to spread swiftly throughout social networks.
• When customers take a look at big agencies carrying out certain economic activities, consisting of mass shopping for or selling of shares during a marketplace frenzy, they may be much more likely to observe the crowd.
• Similarly, pushed with the aid of herd behaviour, depositors may additionally withdraw their cash from banks, leading to potential bank runs or failures.
• The average payment of records breaches in India stood at $2.18 million in 2023, a 28 percent increase since 2020.
• The most common attacks in India are phishing (22 percent), accompanied by stolen or compromised credentials (16 percent).
• Digitalisation can impact inflation and output dynamics, and financial policy transmission in numerous manners and the general effect ought to vary over time given the quick pace of trends.

Way Ahead

• The RBI has been mission proactive policy measures to harness the blessings of digitalisation while mitigating the rising risks of digitisation within the economic sector.
• The move-border digital alternate guidelines could play a crucial position in harnessing new opportunities, constructing trust, and facilitating coordination on regulatory components like statistics security and cybersecurity. 
• The internationalisation of the rupee is also progressing backed through a complete and incorporated policy approach.

Source: The Indian Express