e-Money share in India’s payment systems reaches 21.5 per cent: RBI

Getting a leg-up from the demonetisation of Rs500 and Rs1,000 currency notes in November 2016, the share of e-Money in India’s payment systems grew to 21.5 per cent in 2017 from 0.8 per cent in 2012, according to a new report prepared by the Reserve Bank of India (RBI).

With Rs 3,459 million e-Money transactions, India was only behind Japan and the US in 2017 with respect to the volume of e-Money transactions, said the report titled “Benchmarking India’s Payment Systems”.

The report, which termed demonetisation “a game-changer for e-Money”, provides a comparative position of the payment system ecosystem in India relative to comparable payment systems and usage trends in other major countries.

“While demonetisation gave the necessary fillip, the availability of mobile infrastructure and alternate payment systems ensured that payment systems were not affected when cash was in short supply,” said the report.

While medium to large-value transactions continue to be made through digital banking channels and cheques, the low-value day-to-day transactions shifted to e-Money, it noted.

The study found that when it comee to using e-Money for online transactions, India is far ahead of other developed countries.

“Although behind China, India has a decent 26 per cent of online transactions using e-Money,” said the report.

In terms of the number of ATMs deployed, India is next only to China. Duuring 2012-2017, ATM deployment grew at a compound annual growth rate of 14 per cent.

“While this is good from the customer service perspective, it depicts high demand for cash,” said the report. At the end of 2017, India had 2,22,300 ATMs which, however, dropped to 2,21,703 as on March 31, 2019.

Debit and credit card payments made up 29.9 per cent of India’s payment systems volume in 2017. Based on the mix of the countries benchmarked, India is in the lower rung and ranks higher than only Germany and Indonesia, said the report.

Meanwhile the Ministry of Corporate Affairs (MCA) has hinted at the indifference of RBI on the IL&FS’s financial services arm (IFIN) for not meeting the basic criteria on CRAR (Capital-to-risky Asset ratio) and NOF (Net owned Funds) and the company’s auditors’ taking refuge in such lack of response from the apex bank in taking action on time against the company. A secret report of MCA notes that one of the auditors BSR had based its opinion on the discussion that the management had with RBI for reporting the CRAR as per the existing method adopted by the company despite RBI observation in inspection report from FY 2014-15.

When there is no sufficient and appropriate basis as to report the CRAR as per the method followed by the company in light of RBI not giving any relaxation in this manner, the auditor relied on the management discussion with RBI.

The Auditor was informed “the RBI had given time up to March 2019 to meet NOF criteria and also had asked for submission of plan to achieve the same for which the company had sought time till March 2018”. The company was in active discussion with RBI on the said matter RBI had repeatedly pointed out the non-compliance with the group exposure norms and wrong calculation of NOF in its Inspection Reports from 2015 onwards. Yet no penalties were imposed during the period and IFIN was allowed to continue its operations without any corrective action.

Udayan Sen, former CEO of Deloitte and statutory auditor of IFIN, said in response to SFIO in one of his statement that “the company did not submit the roadmap as requested in the RBI letter. We did not see any further correspondence from RBI on that topic until the letter of November 1, 2017. In that letter while RBI asked the company to submit a roadmap, no time limit was indicated. In any case we did not perceive the non-submission of the roadmap until the date of adoption of financial statement as a significant non-compliance since there was a live dialogue between the company with RBI”, he responded.

The RBI had given time up to March 1, 2019 to meet the minimum net owned funds criteria and even after not meeting that also no action was considered by the apex bank.

The MCA report quotes existing laws saying “non-compliance with laws and regulations that have a fundamental effect on the operations of the entity may cause the entity to cease operations or call them into question the entity’s continuance as a going concern. The company did not submit the roadmap to RBI.

The Serious Fraud Investigation Office (SFIO) chargesheet alleges that it was only in November 2017 that “the classification of group companies in order to arrive at NOF (net owned funds) and credit to risk assets ratio (CRAR) as per RBI Act was strongly conveyed to IFIN”. Hence, the probe agency believes that action at the right time may have prevented ballooning of the IL&FS.

Indo-Asian News Service