The Pattern #34: Digital wins, RBI’s gains and MSME innovation

Mayank Jain   /    Head - Marketing and Content    /    2022-11-04


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    Hello and welcome to this week's edition of The Pattern!

    I don’t know about you, but I’m still reeling from the Diwali hangover. Traveling home, shopping, eating, exchanging gifts - I already can’t wait for next year, but I know I speak for many when I say my wallet could use some time to recharge.

    Estimates predict festive spending could hit a massive USD 32 billion this year, and festive shopping has already broken records. However, as Indians’ loosened their purse strings, an interesting trend emerged alongside.

     For the first time in two decades, currency in circulation declined during Diwali week. According to SBI Research, the weekly movement in currency in circulation in that week showed a decline of INR 7,600 crore this year, as opposed to an increase of over INR 40,000 crore in the last two years.

    Note that the share of digital transactions increased from just 11.26% in FY16 to 80.4% in FY22.

     Looks like India’s unabating efforts towards digitisation are bearing fruit. The SBI report also acknowledged that interoperable payments systems like UPI, wallets, and PPIs have made it much simpler and cheaper for people to transfer money digitally.

    While I think about whether India will ever become a ‘cashless’ economy, it's definitely heartening to see increasing levels of formalization in the country’s payments systems.

    Staying on the theme of innovation and reinvention, India’s Central Bank Digital Currency (CBDC) made a solid start in real-time trades, where several banks used this virtual currency to settle government bond transactions worth approximately INR 275 crore.  

    The possibilities of CBDC are pretty exciting -  it’ll give digital payments another push, reduce costs of currency management, and bring transparency to India’s shadow economy. Of course, several hurdles will have to be overcome upon a full rollout. The first challenge being introducing this digital currency to pockets where the population lacks access to education and internet services. 

     Questions of awareness raising, cybersecurity, compliance and more are bound to arise, and it will be intriguing to see how the central bank tackles these challenges. 

    Digitisation is clearly the theme of the week, with RBI Governor Shaktikanta Das saying a few days ago that the regulatory body is considering digitising SME and Kisan Credit Card loans end-to-end in the next year. 

    If you’ve taken even a cursory look at our blogs, you’d know that we at FinBox are particularly passionate about the subject - digitizing SME loans in an emerging economy like ours will bring down lending costs, increase credit access to the underserved, and make the entire process faster and more efficient. I’m excited to see if the RBI makes good on this promise.

    In keeping with the subject of SME credit, my colleague had written this piece a while ago on Equated Daily Instalments (EDI) and how it’ll bring formal credit to crores of small businesses. We’ll be delving deeper into this subject during our webinar ‘EDIs: Making MSME credit work with innovative products’ on 10th November at 3 PM, so don’t forget to register here.

    That’s all from me this week - as always, leaving you with a few reading recommendations below:




    Thank you for reading. If you liked this edition, forward it to your friends, peers, and colleagues. You can also connect with me on Twitter here and follow FinBox on LinkedIn to never miss any of our updates. 

    Cheers, Mayank

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