Aspirant Academy

Economy

Financial Inclusion and Payment Systems

RBI, Monetary Management, Banking & Financial Reforms

Paper I · Unit 2 Section 7 of 11 0 PYQs 29 min
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Financial Inclusion and Payment Systems

6.1 Financial Inclusion Journey

Three Pillars of Financial Inclusion — JAM Trinity:

  • J — Jan Dhan Yojana (2014): Zero-balance bank accounts for all adults. 54 crore+ accounts; Rs 2.31 lakh crore deposits (March 2025).
  • A — Aadhaar: 12-digit biometric ID; 1.37 billion enrolled. Enables e-KYC, DBT, and cashless service delivery.
  • M — Mobile: Smartphone and feature phone penetration enabling digital banking via UPI, USSD, apps.

Beyond JAM — Supplementary Schemes:

  • PM Jan Dhan Additional Features: RuPay debit card (free), Rs 2 lakh accident insurance (RuPay card linked), Rs 30,000 life insurance (PMJJBY), Rs 10,000 overdraft facility
  • Pradhan Mantri Mudra Yojana (PMMY): Collateral-free loans up to Rs 10 lakh to micro/small enterprises — Shishu (up to Rs 50,000), Kishore (Rs 50,000–5 lakh), Tarun (Rs 5–10 lakh); Tarun+ (up to Rs 20 lakh from 2024)
  • Stand-Up India: Minimum 1 SC/ST and 1 woman entrepreneur per bank branch — loans Rs 10 lakh to Rs 1 crore for greenfield enterprises

6.2 Payment System Evolution

UPI (Unified Payments Interface):

  • Launch: August 2016 by NPCI
  • Technology: Real-time, interoperable, 24×7 payment system using Virtual Payment Address (VPA)
  • Scale: 17.4 billion transactions, Rs 23.25 lakh crore (March 2025); India handles ~50% of global real-time payments
  • Key features: Person-to-Person (P2P), Person-to-Merchant (P2M), Recurring Mandate (AutoPay)
  • International: UPI linked with Singapore's PayNow; adopted in UAE, Bhutan, Nepal, Sri Lanka, France, UK
  • UPI 123Pay: For feature phone users — works without internet via IVR, missed call, and near-field sound
  • UPI Lite: For small transactions without PIN; uses on-device balance

Other NPCI Systems:

  • IMPS (Immediate Payment Service): 24×7 real-time bank transfer; Rs 5 lakh limit
  • NACH (National Automated Clearing House): Bulk payments for salaries, EMIs, dividends
  • RuPay: India's domestic card network — 800 million+ cards; accepted internationally (UAE, Singapore, Bhutan)
  • FASTag: RFID-based electronic toll — 97%+ highway toll transactions now digital (2024)

Digital Rupee — CBDC:

  • RBI launched e-Rs (Digital Rupee / Central Bank Digital Currency) in two phases:
    • Wholesale CBDC (e-Rs-W) pilot: 1 November 2022 (for inter-bank settlement)
    • Retail CBDC (e-Rs-R) pilot: 1 December 2022 (for general public via bank apps)
  • Unlike UPI (bank account-based), the Digital Rupee is a RBI liability (sovereign currency in digital form)
  • Works offline; programmable (can have conditions on spending); no interest paid
  • Distinction from cryptocurrency: CBDC is centralised, sovereign, and legal tender; crypto is decentralised and unregulated