However, the report “India’s Promise: The Rise of Digital Credit — the Most Profitable Part of the Financial Inclusion Journey” reveals that banks only account for a small percentage of UPI transactions.

The research continued by saying that the bigger prize deposits that are still the bastion of banks have been hampered by legal restrictions and a lack of physical distribution network.

The analysis found that while debit card volumes have been continuously dropping over the past five years, this is despite the market’s very low penetration when compared to others. UPI poses a growth risk for older forms of cashless payments such as cards.

India’s efforts to broaden access to banking services are also praised in the study. Few countries match India on the progress it has made on Financial Inclusion, especially on the deposits and payments front, according to a Bernstein report. The report cites increased access to bank accounts and an increase in the number of savings deposit accounts as the two most important “measurable” aspects of the country’s financial inclusion status.

Providing universal access to basic transaction banking facilities is a top priority, and the study notes that PMJDY (Pradhan Mantri Jan-Dhan Yojana) has been a driving force behind the dramatic increase in the number of people with savings accounts.

In spite of the fact that “the Jan Dhan programme was available through all the banks,” the research found that “over 95 percent of the opened accounts were with Public Sector Banks (PSBs) and the Regional Rural Banks” (which are often sponsored by a Public Sector bank).

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Interestingly, the public sector banks and regional rural banks’ massive distribution network likely played a part in their disproportionately significant contribution.

Even in urban regions where the private sector banks are not too far behind on distribution, “PSBs & RRBs banks also accounted for the bulk of the additions,” the survey noted.

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