RBI tightens grip on payment ecosystem as digital transactions near 98% of total payments

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• Digital payments made up 97.6 percent of total payments in 2024–25, RBI reports
• UPI led transaction volumes; debit card use fell, credit card use grew steadily
• RBI issued new rules for payment aggregators and strengthened AePS due diligence

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India’s digital payments grew 17.9 percent in value terms in 2024–25, accounting for 97.6 percent of total payments, according to a recent report by the Reserve Bank of India.

Paper-based instruments such as cheques now represent just 2.4 percent of transaction value.

In volume terms, digital payments expanded even faster, by 35 percent, reflecting the growing use of digital modes for low-value, everyday transactions. As a result, the average value of retail digital payments declined to Rs 3,830 in 2024–25 from Rs 4,382 a year earlier, underscoring the deepening penetration of digital payments for small-ticket transactions.

The Unified Payments Interface (UPI) continued to dominate transaction volumes, while RTGS retained its position as the primary channel for high-value transfers. Debit card usage continued to decline, even as credit card transactions registered steady growth.

Against this backdrop of rapid expansion, the Reserve Bank said it has stepped up efforts to strengthen governance, security and efficiency across the payments ecosystem. The central bank has been at the forefront of enhancing the payment and settlement system through technology-driven innovations, accessibility measures and global outreach initiatives, while simultaneously tightening regulatory oversight to address emerging risks.

A key regulatory milestone during the year was the issuance of the Master Direction on Regulation of Payment Aggregators on September 15, 2025. The framework consolidates existing guidelines on domestic and cross-border payment aggregation and establishes a comprehensive regulatory regime for both bank and non-bank entities operating in the sector. It introduces a formal authorisation process with clear eligibility norms, minimum capital requirements, governance standards and fit-and-proper criteria, aimed at ensuring that only financially sound and credible entities operate in the payments chain.

The directions also mandate stringent KYC and AML checks by payment aggregators on merchants to prevent fraud and safeguard consumer trust. In addition, escrow account operations have been brought under tighter regulation, with specific requirements on usage, accounting, reporting and liquidity management.

The Reserve Bank has also focused on strengthening the Aadhaar Enabled Payment System, which plays a critical role in enabling interoperable banking transactions, particularly in rural and semi-urban areas. On June 27, 2025, the RBI issued directions mandating stricter due diligence and risk management norms for AePS Touchpoint Operators, effective from January 1, 2026.

Under the new framework, acquiring banks are required to conduct full KYC of AePS Touchpoint Operators or rely on existing KYC if already completed by business correspondents or sub-agents. Periodic KYC updates have been made mandatory, and fresh KYC must be undertaken if an operator remains inactive for more than three months. Banks have also been asked to continuously monitor transactions, set operational parameters such as transaction volume, velocity and location, and strengthen fraud risk management systems.

Beyond domestic regulation, the RBI has accelerated efforts to expand the global footprint of India’s payment systems. To address persistent challenges of high costs, slow settlement and limited transparency in cross-border payments, the global reach of UPI is being extended through bilateral and multilateral arrangements. These include QR code-based acceptance of UPI at merchant locations abroad and cross-border remittance linkages.

The central bank is also collaborating with partner jurisdictions to deploy UPI-like sovereign payment systems, while offering the RuPay technology stack to other countries seeking to develop their own domestic card schemes. These initiatives reflect India’s broader push to position its digital payment infrastructure as a global public good.