Executive Summary:
This document, a response to Lok Sabha Unstarred Question No. 1217, outlines the Indian government's perspective on the contribution of digital transactions to promoting a cashless economy. It details the adoption rates of digital payments, mechanisms for monitoring digital payment platforms, support for MSMEs in adopting digital payment systems, and the impact of digital transactions on tax compliance. Data on digital payment transactions from FY 2019-20 to FY 2024-25 is included.
Key Points / Main Content:
Digital Payment Adoption and Growth:
* Annexure I details the volume and value of digital transactions from FY 2019-20 to FY 2024-25, showing significant growth in both volume (from 3,401.55 Crore to 22,198.15 Crore) and value (from 1,619.69 lakh Crore to 2,862.12 lakh Crore).
* The government collaborates with stakeholders like RBI, NPCI, fintechs, banks, and State Governments to boost digital payment adoption, including in tier 2 and tier 3 cities.
* RBI established the Payments Infrastructure Development Fund (PIDF) in 2021 to encourage digital payment infrastructure deployment in tier 3 to 6 cities, North-Eastern States, and Jammu & Kashmir; approximately 4.77 Crore digital touch points have been deployed through PIDF as of May 31, 2025.
Monitoring and Performance Measurement:
* RBI developed the Digital Payments Index (RBIDPI) to measure the extent of digitization of payments; the index stood at 465.33 for September 2024, with a base period of March 2018 (Index = 100).
Support for Small Businesses and MSMEs:
* The government, RBI, and NPCI have implemented initiatives to support MSMEs in adopting digital payment systems.
* These initiatives include incentive schemes for low-value BHIM-UPI transactions, Trade Receivables Discounting System (TReDS) guidelines, and rationalization of Merchant Discount Rate (MDR) for Debit Card Transactions.
Impact on Financial Inclusion and Tax Compliance:
* Digital payments have revolutionized access to financial services, especially for underserved communities, by creating a financial footprint for individuals and businesses.
* This footprint enables financial institutions to assess creditworthiness, increasing access to formal credit channels and bringing more entities into the formal financial ecosystem.
* Digital platforms like UPI have enabled citizens to accept digital payments, reducing cash dependency and increasing formal economic participation.
Impact Analysis:
RBI:
* Impact: Oversees and monitors digital payment systems through the RBIDPI and PIDF initiatives.
* Action Required: Continue to monitor the RBIDPI and manage the PIDF to further encourage digital payment adoption.
NPCI:
* Impact: Collaborates with the government and RBI to promote digital payment adoption and support MSMEs.
* Action Required: Continue to work with the government and RBI to implement initiatives supporting digital payments for MSMEs.
Fintechs and Banks:
* Impact: Play a role in increasing digital payment adoption rates.
* Action Required: Continue to innovate and expand digital payment solutions, particularly in tier 2 and tier 3 cities.
State Governments:
* Impact: Involved in increasing digital payment adoption rates.
* Action Required: Support and promote digital payment adoption within their respective states.
Small Businesses and MSMEs:
* Impact: Benefit from initiatives promoting digital payment adoption, expanding their customer base and improving efficiency.
* Action Required: Adopt digital payment systems to expand their customer base and improve efficiency.
Citizens and Underserved Communities:
* Impact: Gain increased access to financial services and credit through digital payment platforms.
* Action Required: Utilize digital payment platforms to participate in the formal financial ecosystem.
Key Entities Referenced
Reserve Bank of India: The central bank of India, playing a key role in promoting digital payments.
National Payments Corporation of India: An organization involved in increasing the adoption rates of digital payments and developing platforms like UPI.
Payments Infrastructure Development Fund: A fund set up by RBI in 2021 to encourage deployment of digital payments infrastructure in Tier 3 to 6 cities, North Eastern States, and Jammu and Kashmir.
Digital Payments Index: An index developed by the RBI to measure the extent of digitization of payments across the country.
BHIMUPI: A mobile payment app that facilitates low value transactions.
Trade Receivables Discounting System: A platform allowing MSMEs to get their invoices discounted at competitive rates.
MSMEs: Micro, Small and Medium Enterprises that the Government is supporting in adopting digital payment systems.
Jammu and Kashmir: A region in India, specifically mentioned as a target for deploying digital payment infrastructure through PIDF.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF FINANCIAL SERVICES
LOK SABHA
UNSTARRED QUESTION NO. 1217
ANSWERED ON MONDAY, JULY 28, 2025/ SRAVANA 6, 1947 (SAKA)
DIGITAL TRANSACTION IN PROMOTING CASHLESS ECONOMY
1217. SMT. SHAMBHAVI:
DR. SHRIKANT EKNATH SHINDE:
SHRI RAVINDRA DATTARAM WAIKAR:
SHRI NARESH GANPAT MHASKE:
Will the Minister of FINANCE be pleased to state:
(a) the contribution of the digital transactions in promoting a cashless economy and enhancing
transparency in financial systems during the last six years, year-wise;
(b) the details of the adoption rates of the digital payments in tier-2 and tier-3 cities as part of
the country's digital transformation in transactions during the above period, State-wise and
year-wise:
(c) the mechanisms in place to track and monitor the Government performance of digital
payment platforms to ensure seamless user experiences;
(d) the steps taken by the Government to support small businesses and MSMEs in adopting
digital payment systems to expand their customer base and improve efficiency, and
(e) whether the Government has any data on the contribution of digital transactions in
enhancing tax compliance and reducing the informal economy, if so, the details thereof?
Answer
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) and (b): The details of digital payment transactions during the last six financial years, i.e. FY
2019-20 to FY 2024-25 is attached as Annexure-I. The Government has been closely working with
different stakeholders including the Reserve Bank of India (RBI), National Payments Corporationof India (NPCI), fintechs, banks and State Governments to increase the adoption rates of digital
payments in the country including in tier-2 and tier-3 cities. RBI has setup a Payments
Infrastructure Development Fund (PIDF) in 2021 to encourage deployment of digital payments
acceptance infrastructure in tier-3 to 6 cities, North-Eastern States and Jammu & Kashmir. As on
May 31, 2025, around 4.77 Crore digital touch points have been deployed through PIDF.
(c) The RBI has developed the Digital Payments Index (RBI-DPI) to measure the extent of
digitisation of payments across the country. The index is published semi-annually and is based on
March 2018 as the base period (Index = 100). As per the latest release, the RBI-DPI stood at 465.33
for September 2024, reflecting continued growth in digital payment adoption, infrastructure, and
performance across the country
(d) In order to support small businesses and MSMEs in adopting digital payment systems to expand
their customer base and improve efficiency, various initiatives have been taken by the
Government, RBI and NPCI from time to time. These, inter alia, includes incentive scheme for
promotion of low value BHIM-UPI transactions for small merchants, Trade Receivables
Discounting System (TReDS) guidelines that allows for MSMEs to get their invoices discounted
on the TReDS platform at competitive rates and rationalization of Merchant Discount Rate (MDR)
for Debit Card Transactions.
(e) The growing adoption of digital payments has revolutionized access to financial services,
particularly for underserved and unserved communities. By enabling seamless, traceable
transactions through platforms like UPI, digital payments have created a robust financial footprint
for individuals and businesses. These footprints serve as alternative data points for financial
institutions, allowing them to assess creditworthiness even in the absence of traditional
documentation. As a result, more people are able to access formal credit channels, which not only
empowers economic participation but also brings more entities into the formal financial ecosystem.
Digital platforms like UPI have enabled citizens including small vendors and rural users to accept
digital payments, reducing cash dependency and increasing formal economic participation.
******Annexure I
Details of digital transactions since last six financial year
Financial Year Volume (in Crore) Value (in lakh Crore)
FY 2019-20 3,401.55 1,619.69
FY 2020-21 4,370.68 1,414.58
FY 2021-22 7,197.68 1,744.01
FY 2022-23 11,393.82 2,086.85
FY 2023-24 16,443.02 2,428.24
FY 2024-25 22,198.15 2,862.12