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 by17.9% in value terms, accounting for 97.6% of India’s total payments. In contrast,payments through paper-based instruments(cheques) declined during the year, representingthe 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 higherat 35% amidst increasing usage ofdigital methods for small value payments. Consequently, the average value of retail digital payments decreased to ₹3,830 during 2024-25from ₹4,382 during 2023-24,” the Central bank said.
The unified payments interface(UPI) accounted for a majority share in thevolume of transactions, while real time grosssettlement (RTGS), which facilitates high valuetransactions, accounted for the largest sharein value term.
Furthermore, while the usageof debit cards has declined, payments throughcredit 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 declinedmoderately, driven by reduction in off-site ATMseven while on-site ATMs increased.
“Increasein digitalisation of payments has reduced thecustomers’ requirement of transacting withATMs. Public Sector Banks (PSBs) accounted for the highest share inthe total number of ATMs, followed by Private Sector Banks (PVBs), andwhite label ATMs – those owned and operatedby non-bank entities, at end-March 2025,” the RBI said.
PSBs had a more even distribution ofATMs across population groups, while thepresence of ATMs of other bank groups wastowards metropolitan, urban, and semi-urbancentres. In contrast, 79.4% of the totalwhite label ATMs were in rural and semi-urbancentres 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, AIcan enhance credit risk assessment andscoring using alternative data, enabling lenders toprovide credit to customers who lack traditionalcredit histories. Through continuous learning,AI can also improve real-time fraud and mule account detection, while enabling hyper personalised loan solutions tailored to borrowerneeds and financial flows,” it said.
“Automation of creditappraisal and know your customer (KYC) throughAI reduces cost, accelerates disbursement, andenables small loans in remote regions. Similarly,integrating AI in the grievance redressal lifecycle –from complaint lodging to closure – can result ina seamless, efficient, and data-driven processes,thus reducing the turnaround times,” it said.
“AI, however, carries incremental risksincluding poor model explainability, data/conceptdrift, automation complacency, and skill gaps inAI oversight, which can lead to systemic errorsor errors in credit assessments. REs need to becognizant of the concomitant challenges suchas data privacy, algorithmic bias and ethicalconsiderations,” it added.
Monitor stress build-up in microfinance segment
Now that the microfinance sector is experiencing stress, with all lenders – excludingother NBFCs (NBFCs excluding NBFC-MFIs) -recording contraction in credit as at end-March2025 ), the RBI has asked REs to monitor the build-up of stress inthe segment.
“Going forward, the performanceof microfinance loans needs to be closelymonitored. Regulatory measure to restore backthe lower risk weights for bank lending to NBFCsalong with easing of monetary policy is helpingNBFCs in expanding their footprint,” it said.
Published – December 30, 2025 08:47 pm IST
