Credit and Finance for MSMEs: Even as digital payments witness momentum across the country amid the Covid pandemic, the annual digital transactions for the MSME Ministry and its attached organisations have continued to decline for the third straight financial year. The number of digital transactions for the ministry itself and its linked offices including Khadi and Village Industries Commission (KVIC), National Small Industries Corporation (NSIC), Office of the Development Commissioner (DC MSME), Coir Board, National Institute for Micro, Small and Medium Enterprises (NI-MSME), and Mahatma Gandhi Institute for Rural Industrialisation (MGIRI) stood at 33.76 lakh involving Rs 17,946 crore during FY21. This was down 19 per cent from 41.96 lakh digital transactions amount to Rs 20,339 crore in FY20 and 31 per cent from 49.35 lakh transactions worth Rs 56,831 crore in FY19.
An analysis of the data sourced from the MSME Ministry’s last three annual reports including FY21, however, showed that digital transactions’ share in the total transaction base went up from 82.47 per cent in FY19 to 84.65 per cent in FY20 and 87.44 per cent in FY21. The ministry had not reported digital transaction performance in its annual reports prior to FY19. While KVIC continued to dominate the digital transaction base in terms of volume for the three financial years, the size of the transactions was highest for NSIC during the period. For FY21, KVIC reported 32 lakh digital transactions worth Rs 4,059 crore while NSIC recorded 69,938 digital transactions involving Rs 12,705 crore.
Comments from the MSME Ministry for this story were not immediately available.
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“In line with the recommendations of Committee of Secretaries (CoS) and the guidelines of MeitY, a committee on Digital Payments has been constituted in the Ministry under the Chairmanship of Secretary (MSME) for making the Ministry and its attached offices achieve the successful implementation of ‘Digidhan Mission’,” the ministry said in FY21 annual report.
The fast-evolving digital payments segment in India, propelled by policy framework and technology penetration, is likely to grow at a compound annual growth rate of 27 per cent during the FY20-25 period. The growth in retail electronic payment systems including National Electronic Fund Transfer (NEFT), mobile banking, and development of payment acceptance infrastructure is likely to boost digital payment transactions from Rs 2,153 lakh crore in FY20 to Rs 7,092 lakh crore in FY25, according to the India Trend Book Report 2021 by the Indian Private Equity and Venture Capital Association (IVCA) and Ernst & Young.
Meanwhile, India’s UPI transaction base grew over threefold in April to Rs 4.93 lakh crore along with a 2.6x increase in volume to 2.64 billion from the year-ago period, according to the data from the National Payments Council of India. However, there was a month-on-month decline of 3.3 per cent in volume from 2.73 billion in March 2021 and 2.2 per cent contraction in value as well from Rs 5.04 lakh crore in March 2021.