Reserve Bank Deputy Governor T Rabi Sankar has announced that India's Unified Payment Interface (UPI) user base could potentially grow from 400 million to 1 billion users, highlighting the significant expansion opportunities in the country's digital payment landscape. Speaking about the transformative impact of digital payments on India's financial ecosystem, the Deputy Governor emphasized the need for continued enhancement of digital payment infrastructure to promote greater financial inclusivity.

Current Market Position and Growth Trajectory

India currently accounts for half of the world's retail payment transactions, establishing itself as a global leader in digital payment adoption. However, the Deputy Governor noted that the number of digital transactions per person still lags behind many developed nations, indicating substantial room for growth. The comparison with Kenya, where digital transaction rates per person are approximately double those of India, underscores this potential for expansion.

UPI's Dominant Role in Digital Transactions

UPI has emerged as the dominant payment method in India, facilitating both Person to Person (P2P) and Person to Merchant (P2M) transactions. The platform processes approximately 81% of the country's retail payment transactions by volume, demonstrating its widespread adoption across various transaction types. The system allows users to link multiple bank accounts into a single mobile application, significantly enhancing convenience and accessibility for consumers.

The National Payments Corporation of India (NPCI), an RBI-promoted entity, launched a USSD-based service in 2016 to provide UPI access to feature phone users, expanding the platform's reach beyond smartphone users and promoting broader financial inclusion.

Global Expansion and International Connectivity

The Reserve Bank has been actively working on linking UPI with Fast Payment Systems (FPSs) of other countries through bilateral agreements. The linkage with Singapore has been operational since February 2023, with similar projects underway with the UAE and Nepal. These initiatives enable seamless inward and outward remittance payments, facilitating international financial transactions.

Indian UPI apps are now accepted via QR Code in several countries, including Bhutan, France, Mauritius, Nepal, Singapore, Sri Lanka, the UAE, and Qatar. This development enables Indian tourists, students, and business travelers to make payments using their Indian UPI apps while abroad, enhancing convenience for international transactions.

Economic Impact and Security Measures

A study cited by the Deputy Governor indicates that a 10% increase in digital payments could boost GDP by 0.3%, highlighting the significant economic implications of expanding digital payment adoption. The remarkable growth in digital payment transactions, with values rising from ₹2,071.00 crore in FY 2017-18 to ₹22,831.00 crore in FY 2024-25, reflects a compound annual growth rate of 41%.

To address cybersecurity concerns, the Reserve Bank has implemented various protective measures, including the 'mule hunter' initiative designed to combat digital frauds. The Deputy Governor emphasized the transformative social impact of UPI, noting that it enables individuals, including housewives, to securely operate small businesses from home, promoting entrepreneurship and economic participation across diverse demographics.

Reserve Bank of India Governor Sanjay Malhotra outlined the central bank's strategic approach to managing India's economy amid global uncertainties, emphasizing institutional independence and data-driven policy decisions in an exclusive interview.

Economic Performance and Growth Outlook

India has emerged as a standout performer among major economies, demonstrating remarkable resilience during challenging global conditions. The Governor highlighted the country's robust growth trajectory, supported by strong domestic demand fundamentals.

The domestic demand-driven growth model has positioned India favorably compared to export-dependent economies, providing greater stability during periods of global uncertainty.

Monetary Policy Framework and Rate Decisions

The central bank implemented significant monetary accommodation, delivering 125 basis points of rate cuts while maintaining focus on domestic growth and inflation dynamics. Governor Malhotra emphasized that policy decisions remain guided primarily by domestic economic conditions rather than external pressures.

Transmission of monetary policy has shown effectiveness across various segments:

Foreign Investment and Financial Sector Strength

The financial sector attracted substantial foreign investment, reflecting confidence in India's long-term growth prospects. In 2025 alone, approximately ₹1,275.00 billion ($15.00 billion) of committed or actual investments flowed into private financial entities.

These inflows represent patient, long-term capital rather than speculative hot money, underscoring investor confidence in the banking system's resilience built over several years through regulatory reforms and institutional strengthening.

Exchange Rate Policy and Rupee Management

Addressing concerns about rupee volatility, Governor Malhotra clarified that RBI does not target specific exchange rate levels. The central bank's intervention strategy focuses on ensuring orderly market movement rather than defending particular thresholds.

The Governor emphasized that currency strength should not be judged solely by exchange rate levels, pointing to India's strong macroeconomic fundamentals including high growth, controlled inflation, substantial forex reserves, and manageable current account deficit.

Inflation Dynamics and Targeting Framework

Current low inflation levels primarily result from food price base effects and soft global commodity prices, representing largely supply-side phenomena. As base effects fade, inflation projections show movement toward the 3.00-4.00% comfort range.

The flexible inflation targeting framework, maintaining the 4.00% target with ±2.00% tolerance band, has contributed to moderating inflation levels since its introduction, though framework modifications remain under government review.

Consumer Protection and Service Enhancement

The central bank prioritized consumer outreach initiatives, recognizing consumers as ultimate beneficiaries of monetary policy. Key improvements include streamlined grievance redressal processes, digitized services, and enhanced delivery mechanisms achieving over 99.50% on-time service delivery.

Source: https://www.ndtvprofit.com/economy-finance/rupee-strategy-to-inflation-target-rbi-governor-on-what-matters-for-indias-economy-read-full-qa