RBI releases ‘Payments Vision 2028’

• The Reserve Bank of India (RBI) released the ‘Payments Vision 2028’ on March 27.

• Various initiatives like introducing electronic cheques and also widening the regulatory ambit to include entities such as e-commerce companies are proposed in the document.

• It has been prepared after considering inputs from various stakeholders. 

• It consists of 15 specific initiatives which are to be taken up during the course of the next three years. 

What is the purpose of this document?

• India’s payments ecosystem has evolved through a calibrated yet adaptive process, guided by successive Payments Vision documents issued by the RBI since 2001.

• Each Vision Document provided direction in tune with the current stage of evolution of the payments landscape while keeping in mind the potential for further development. 

• By focusing on establishment of core settlement infrastructure, strengthening of institutional framework, expansion of digital inclusion, and enabling innovation, successive Vision Documents have paved the way for India’s emergence as a global leader in digital and real-time payments.

• The Vision document focuses on user empowerment, strengthening safeguards against fraud, enhancing efficiency of cross-border payment frameworks and promoting ease of doing business, among others.

Key outcomes of the previous Vision Documents:

1) Foundational Phase (2001-2004)

At that time, India’s payments were dominated by paper instruments, primarily cheques. The document emphasised consolidation, efficiency, and security, aiming to shift towards electronic modes and centralised settlements. Key milestones included the launch of the Real-Time Gross Settlement (RTGS) system in 2004, the expansion of Electronic Clearing Services (ECS), and the early development of the Cheque Truncation System (CTS).

2) Institutional and Regulatory Phase (2005-2008)

It led to the creation of the Department of Payment and Settlement Systems (DPSS) within the RBI in 2005, thereby providing a dedicated regulatory and developmental focus. The landmark Payment and Settlement Systems Act, 2007, and the PSS Regulations, 2008, granted statutory authority to the RBI to regulate and supervise all payment systems. This document also envisaged an umbrella organisation for retail payments, leading to the establishment of the National Payments Corporation of India (NPCI) in 2008.

3) Oversight and Expansion Phase (2009-2012)

During this phase, National Electronic Funds Transfer (NEFT) and RTGS systems were expanded, electronic transactions gained traction, and the RBI enhanced its supervisory role over Financial Market Infrastructures (FMIs).

4) Inclusion and Standardisation Phase (2012-2015)

It introduced the explicit goal of achieving a less-cash society. Notable outcomes included the licensing and expansion of Prepaid Payment Instruments (PPIs), groundwork for the Trade Receivables Discounting System (TReDS), Bharat Bill Payment System (BBPS), and acceleration of Aadhaar Enabled Payment Systems (AEPS).

5) Digital Transformation Phase (2016-2018)

This coincided with India’s digital payments takeoff. The period witnessed the launch of transformative platforms such as Unified Payments Interface (UPI), under NPCI’s stewardship.

6) Measurable Outcome Phase (2019-2021)

It introduced a results-oriented framework under the theme “Empowering Exceptional (E)-payment Experience”. It articulated five core attributes — safety, security, convenience, speed, and affordability and established quantitative targets, including a four-fold increase in digital transactions by 2021.

7) Globalisation and Trust Phase (2025)

Anchored on the theme “E-Payments for Everyone, Everywhere, Every time (4Es)”, it rested on five goalposts — Integrity, Inclusion, Innovation, Institutionalisation, and Internationalisation. The alternative authentication framework, Master Direction on Payment Aggregators, near real-time Cheque Truncation System, etc, were the key outcomes.

Payments Vision 2028

• The current Payments Vision document sets the course up to December 2028.

• It builds upon the remarkable trajectory of digital payments in India with the core theme — ‘Shaping India’s Payment Frontier’. 

• It underscores the dual imperative of consolidating and strengthening the existing systems / infrastructure, while pioneering the future of payments.

• Under the core theme, certain specific initiatives are proposed. 

They are:

• To promote inclusivity and resilience, a framework for interoperability in Trade Receivables Discounting System (TReDS) is proposed to be developed to promote an integrated, efficient, and accessible receivables discounting ecosystem.

• To enhance safety in digital payments, enabling or disabling transactions across digital payment modes via issuer channels shall be explored. A shared responsibility framework with both the customer’s bank (issuer) and the beneficiary’s bank jointly bearing the liability shall be pursued. 

• A review of the design and security features of cheques shall be conducted. Introduction of a Cyber Key Risk Indicators (KRI) framework for non-bank Payment System Operators (PSOs) shall be implemented for enhancing cyber resilience.

• A review of the cross-border payments framework shall be conducted to enhance efficiency, and which shall be complemented by publishing dedicated reports on specific aspects.

• For promoting ease of doing business and convenience, the regulatory process for cross-border payment authorisation under the Payment and Settlement Systems (PSS) Act, 2007 and Foreign Exchange Management Act (FEMA), 1999 shall be streamlined along with examining the case for recognising Small Payment System Providers under a perpetual regulatory sandbox structure. 

• Customers face challenges in managing their payment instructions in case their account number changes due to shifting to another bank, merger of banks, etc. To address this, feasibility of implementing a ‘Payments Switching Service’ shall be explored. It is envisaged as a centralised service that would facilitate migration of payment instructions, both incoming and outgoing, from one account to another, thereby enabling customers to change their bank accounts with minimal friction.

• To provide a fillip to research pertaining to digital payments, dedicated research and training capacity shall be focused upon apart from providing enhanced access to domestic and cross-border payments data.

• To promote systemic stability and integrity, entities deemed to be playing a critical role in facilitating digital payments shall be brought within the regulatory fold. 

• Introduction of a uniform Domestic Legal Entity Identifier (DLEI) shall be explored. A unique identifier for non-individuals that would enable identification of parties to a transaction is crucial for managing risks in the financial system. Currently, there exist myriad identifiers in India, each with its own specific purpose and features. The DLEI, if found feasible, could be new or selected from the existing identifiers.

• Innovation in card payments space shall be encouraged. To foster competition, spur innovation, and strengthen resilience, building an open and interoperable card ecosystem shall be explored. The initiative is envisaged to empower cardholders and merchants with choice, introduce secure and smart tokenisation and orchestration, and facilitate transparent pricing that advances customer protection.

• Cheques as a payment instrument offer some unique benefits over other payment methods. To leverage the unique benefits of paper-based instruments and the speed and reliability of electronic payments, and cater to new business use cases. Introduction of electronic cheques shall be explored.