In the rising digital payments ecosystem in India, the share of small value payments are seen growing faster according to a report by the Reserve Bank of India (RBI).
“During 2024-25, digital payments grew by 17.9% in value terms, accounting for 97.6% of India’s total payments. In contrast, payments through paper-based instruments (cheques) declined during the year, representing the remaining 2.4%,” the RBI said in its Report on Trend & Progress of Banking in India in 2024-25.
“In volume terms, growth in digital payments was much higher at 35% amidst increasing usage of digital methods for small value payments. Consequently, the average value of retail digital payments decreased to ₹3,830 during 2024-25 from ₹4,382 during 2023-24,” the Central bank said.
The unified payments interface (UPI) accounted for a majority share in the volume of transactions, while real time gross settlement (RTGS), which facilitates high value transactions, accounted for the largest share in value term.
Furthermore, while the usage of debit cards has declined, payments through credit cards continued to increase in recent periods, the RBI pointed out.
ATMs decline
The rapid increase is seamless and convenient UPI based payments has led to reduction in money withdrawal at automated teller machines (ATMs).
Consequently, during 2024-25, the total number of ATMs declined moderately, driven by reduction in off-site ATMs even while on-site ATMs increased.
“Increase in digitalisation of payments has reduced the customers’ requirement of transacting with ATMs. Public Sector Banks (PSBs) accounted for the highest share in the total number of ATMs, followed by Private Sector Banks (PVBs), and white label ATMs – those owned and operated by non-bank entities, at end-March 2025,” the RBI said.
PSBs had a more even distribution of ATMs across population groups, while the presence of ATMs of other bank groups was towards metropolitan, urban, and semi-urban centres. In contrast, 79.4% of the total white label ATMs were in rural and semi-urban centres at end-March 2025, it said.
AI carries incremental risks
Meanwhile in the report RBI has cautioned banks and non banks collectively called Regulated Entities (REs) about the incremental risks of Artificial Intelligence (AI).
“In the financial sector, AI can enhance credit risk assessment and scoring using alternative data, enabling lenders to provide credit to customers who lack traditional credit histories. Through continuous learning, AI can also improve real-time fraud and mule account detection, while enabling hyper personalised loan solutions tailored to borrower needs and financial flows,” it said.
“Automation of credit appraisal and know your customer (KYC) through AI reduces cost, accelerates disbursement, and enables small loans in remote regions. Similarly, integrating AI in the grievance redressal lifecycle – from complaint lodging to closure – can result in a seamless, efficient, and data-driven processes, thus reducing the turnaround times,” it said.
“AI, however, carries incremental risks including poor model explainability, data/concept drift, automation complacency, and skill gaps in AI oversight, which can lead to systemic errors or errors in credit assessments. REs need to be cognizant of the concomitant challenges such as data privacy, algorithmic bias and ethical considerations,” it added.
Monitor stress build-up in microfinance segment
Now that the microfinance sector is experiencing stress, with all lenders – excluding other NBFCs (NBFCs excluding NBFC-MFIs) – recording contraction in credit as at end-March 2025 ), the RBI has asked REs to monitor the build-up of stress in the segment.
“Going forward, the performance of microfinance loans needs to be closely monitored. Regulatory measure to restore back the lower risk weights for bank lending to NBFCs along with easing of monetary policy is helping NBFCs in expanding their footprint,” it said.
Published – December 30, 2025 08:47 pm IST
