Announcements

Call for Papers: 16^th Emerging Markets Conference

14^th - 17^th December, 2025

XKDR Forum in collaboration with Vanderbilt law School is inviting papers to be submitted for the 16^th Emerging Markets Conference, 2025. In the past, the audience for these events has comprised of academics, participants from the legal and financial industry, policy makers from government and regulators.

Details of the previous conferences can be viewed at https://emergingmarketsconference.org/. The conference aims to cover presentations and discussions across the following set of research topics:

• The sources of economic success or failure in EMs.
• Finance in EMs (households, financial markets, financial intermediaries, firms and finance, finance and growth).
• Political economy, law, public administration, regulation in EMs.
• The impact of populism upon the possibility of sustained growth.
• Insights into large EMs that matter in and of themselves.
• Insights from narrow research projects that illuminate EMs in general.
• The new phase of globalisation and its consequences for international trade, international finance and the nature of the EM firm.
• Features of a society that enable or disable convergence into the ''normal'' package of high levels of freedom and prosperity.
• The puzzles faced by all kinds of decision makers: individuals, civil society actors, firms, all levels of government.
• Grand challenges such as climate change: implications for EMs and ramifications of choices made in EMs.
• State capability in EMs.

The ideal papers for EMC shed light on the great questions of the age, while being analytically sound and persuasive.

Conference design

For EMC 2025, we intend to bring on board a wider research papers, panels on contemporary policy and keynotes by experts in the area of finance, economics and law. The conference this year will be completely in-person mode.

Best Discussant Award

Each year, we award the Emerging Markets Conference discussant award for the best discussant and the first runner up discussant of the papers presented on each day of the EMC. The discussants are selected by an audience poll.

Program Committee

• Adam Feibelman, Tulane University
• Ajay Shah, XKDR Forum
• Bidisha Chakraborty, Saint Louis University
• Dan J Awrey, Cornell Law School
• Harsh Vardhan, Independent
• Indradeep Ghosh, Dvara Research
• Joshua Felman, J. H. Consulting
• Kose John, NYU Stern
• Kumar V, SMU - Cox School of Business
• Marios Panayides, The University of Oklahoma
• N. Prabhala, Johns Hopkins University
• Pab Jotikasthira, SMU - Edwin L Cox School of Business
• Pradeep Yadav, The University of Oklahoma
• Rambhadran Thirumalai, ISB
• Rajeswari Sengupta, IGIDR
• Renuka Sane, TrustBridge
• Sanjay Kallapur, ISB
• Susan Thomas, XKDR Forum
• Tanika Chakraborty, IIM Calcutta
• Vimal Balasubramaniam, Queen Mary University of London
• Yesha Yadav, Vanderbilt University

Important dates

• Paper submission deadline: 25^th August 2025.
• Expected date for notification of acceptance: 30^th September 2025.
• Dates of the conference: 14^th - 17^th December 2025.

Support

Financial support for academic authors whose papers have been accepted at the conference includes travel support of up to USD 500 as well as accommodation at the conference venue for 3 nights of the conference (14^th to 17^th December).

Registration and contact details

Submissions: Please submit your papers in pdf format by following this link here
For any clarifications, please reach out to Jyoti at outreach@xkdr.org

Dealing with fraud in consumer finance

by Renuka Sane.

There is great ire among consumers about financial fraud. Fraud is the deliberate deception of one party by another for the purpose of unlawful gain, typically involving the misrepresentation or concealment of material facts. When fraud occurs, the key question is: who ends up paying for it? The answer to this is not so obvious. Consider the recent incident involving Falcon, an online bill discounting platform now defunct. This platform was promoted since 2021 as a peer-to-peer invoice finance platform. It had about 7000 investors and had raised Rs.1,700 crores by 2025. Retail investors lent money against invoices supposedly issued by reputable companies, earning high returns over short tenures. Until suddenly they didn't. Consumers realised one day that Falcon had closed its offices and cut off all communication. The ensuing cascade of chargebacks for services not rendered, their denial by financial firms, a subsequent Bombay High Court interim order which continued the freeze on chargeback requests illustrates how the existing system leaves consumers in a precarious position. There is no easy answer when it comes to dealing with fraud, but understanding the options is a good place to start.

The case

Falcon operated an online platform for short-term invoice/bill discounting. Payments to Falcon were routed through a payment aggregator called Worldline ePayments India Pvt. Ltd. Worldline had pooling accounts with various banks and cards, including the State Bank of India through which such transactions would be facilitated.

Falcon ceased its operations owing to allegations of fraud. Once customers figured that Falcon was no longer operational, they started asking for reversals of their transactions, or chargebacks, on the basis of services not rendered. As a result Worldline's pooling account with SBI started to get debited. Worldline requested SBI not to debit their pooling account, and SBI initially agreed for a limited period. This essentially meant that SBI would not be able to honour customer requests on chargeback. Once the limited period got over, SBI began to debit Worldline's account again. A Vacation Court order on May 19, 2025, temporarily stopped SBI from continuing to debit Worldline's pooling account to cover chargeback requests related to Falcon's transactions.

The dispute continued. SBI didn't want to be the only bank which was temporarily stopped from debiting Worldline's pooling account and to risk its funds getting debited. Other banks (or card companies) wanted a simpler life by not having to deal with chargeback requests. Worldline didn't want any debiting from any account - according to them if the customer was defrauded by Falcon, they had nothing to do with it.

All of these parties were given relief by the interim order of the Bombay High Court which ordered that no bank or credit card company will now debit Worldline's account on chargeback requests. The Court appears more sympathetic to shareholders of the intermediaries and banks relative to customers, as they have lost their money, at least until there is a final order in this case.

Who should the burden be on?

While the Bombay high court seems to have bought into the argument that the intermediary is just a pass-through, the critical question in markets remains, "who bears the burden?" A standard response in India is to increase licensing and networth requirements to carry out financial activity, but that often makes the informal market bigger, and fails to address the problem of fraud. We have three choices - leave it to the customer, hold the firm committing fraud to account, or place liability on the intermediary. The choice we make will shape the structure of markets, the roles of intermediaries, and incentives for honesty and risk.

Option 1: The customer

In a caveat emptor or "let the buyer beware" world, the burden of due diligence rests solely on the customer. If Falcon ceased operations, and consumers money was held up, then it is the consumers loss.

On the one hand, a caveat emptor world incetivises caution by consumers. Consumers may learn to discern good firms from bad with experience and this may eventually drive out the bad firms. However, it also leads to enormous wariness in every transaction. Anonymous transactions, where the buyer and seller do not know nor have long-term interactions with each other - become impossible or extremely risky. This is an implicit entry barrier for new firms trying out innovative products - they will have to take significant efforts to signal credibility. Modern capitalism becomes less viable if fraud risk sits squarely with the consumer.

A private certification agency could mediate the "credibility" signal, offering a seal-of-approval as a safeguard against the risk of fraud. However, such private certification agencies are notably absent in India. The reasons for this lack of emergence remain unclear -- perhaps it is difficult to design viable business models within a price-sensitive and fragmented market. In the absence of a credit certification agency, a caveat emptor world means retail customers have no ex-post recourse, only their ex-ante judgment.

Option 2: The firm

Here, the company providing the goods or services is made directly and strictly liable for any fraud. Under Indian law, if a seller's fraudulent actions prevent or frustrate a buyer's due diligence, the seller cannot then turn around and claim that the buyer should have been more careful under the caveat emptor principle. This runs into trouble when customers are dealing with a fly-by-night operator. If the company commits fraud and vanishes, it becomes the domain of the police to pursue, locate, and prosecute the company's proprietors and courts to impose sanctions. If the company's resources are exhausted, there is no meaningful restitution to the consumer; sanctions may deter future fraud but do not compensate customer's losses. If the justice system doesn't work well or is not designed to deal with class action suits by a group of consumers, then this outcome is not too different from the burden being solely on the customer.

Option 3: The intermediary

In this set up, the intermediary, such as the payment aggregator, would act as a trusted third party. The burden of scrutinising legitimacy - of both buyer and seller - would rest on the intermediary. The intermediary may provide insurance to buyers (and sellers) against fraud, restoring lost funds where possible. The liability (at least in part) would lay on Worldline. We see an example of this in the credit card industry where the Fair Credit Billing Act in the United States requires credit card companies to investigate unauthorised transactions (or billing errors in the case of fraud) and transfer money back to customers if they report misuse of the card (or evidence of fraud) within a specified period of time.

In India, RBI requires payment aggregators to do due diligence of merchants it onboards. In the Falcon case, Worldline as the payment aggregator would have conducted due diligence of Falcon. A liability framework exists under the RBI as well, but only for unauthorised transactions. The applicability to instance of fraud remains unclear. If the RBI were to extend the liability framework to deal with fraud, similar responsibilities may get placed on payment aggregators, and other intermediaries.

At first glance, this is a better outcome for consumers. They are assured of the credentials of an anonymous provider of services and getting their money back in the event of fraud. This may increase the number of transactions that take place and the size of the market. However, protection comes at a cost. The intermediary firm will have to incur additional expenses and significantly change its business model. The firms may pass on the burden of anti-fraud compliance to customers in the form of higher platform fees, or stricter participation standards. But firms will also be incentivised to invest in measures to detect and block fraudulent transactions. We may see a consolidation in the intermediaries market with a few, large providers able to offer risk management at cost.

Conclusion

Instances of fraud create pressure upon the government to create an ex-ante regulatory system that makes many kinds of fraud infeasible through licensing conditions, price restrictions, and other regulatory barriers. But these conditions also make many kinds of products and transactions infeasible, which is not in the best interest of consumers and markets.

A well-designed regulatory system should first confirm that a complaint involves fraud, as not all losses are caused by fraud. It should then allocate this burden wisely. The Falcon case suggests that we are operating under the Option 1 scenario. The desirability of shifting to Option 3, with a significantly higher liability burden on the intermediaries, is an issue that merits immediate attention. A system that harnesses the interests of profit-seeking financial firms in blocking fraud is the one that has the best chance of success.

The author is a researcher at the TrustBridge Rule of Law Foundation.

Examining the performance of ERCs at APTEL

by Chitrakshi Jain, Bhavin Patel, and Renuka Sane.

Introduction

The efficiency of the State Electricity Regulatory Commissions (SERC)s, the Central Electricity Regulatory Commission (CERC) and the Joint Electricity Regulatory Commission (JERC) influence investability and growth of the electricity sector. For example, it costs regulated entities time and resources to petition the relevant ERC for decisions and potentially, to challenge decisions taken by the ERC at the appellate tribunal (APTEL), which exercises supervisory control over the ERCs and reviews their decision-making.

This article studies how ERC decisions perform at APTEL. We collect information about aspects of the ERCs' functioning from the text of orders passed by APTEL. This helps us (a) identify the most-litigious areas across ERCs and (b) examine how the ERCs' decisions perform in appeal. We use sub-national comparative analysis to understand the variation in the functioning of the different ERCs and the litigiousness of issues in different states.

We ask the following questions:

1. Which ERCs contribute the most appeals at APTEL?
2. What are the most litigious issues at APTEL?
3. In how many appeals was the ERC's decision:
   1. Upheld, i.e. appeal was dismissed by APTEL?
   2. Partially upheld, i.e. appeal was partly allowed at APTEL?
   3. Overturned, i.e. appeal was fully allowed at APTEL?
4. How often were the ERCs ordered to reconsider their decisions, i.e. the matter was remanded?

Our results suggest that issues related to tariff determination and restructuring are the most litigated issues at APTEL across ERCs, with the exception of Maharashtra. ERCs are differently situated in their ability to defend their decisions at APTEL and in the quality and clarity of their orders. We argue that such assessments, if regularised, can assist ERCs in improving the quality and form of their decision-making by creating a feedback loop, and can also assist in identifying areas for policy reform at the sub-national level.

Methods: Data

We obtained the orders passed by APTEL between the years 2013-2022 where the ERCs are a party to the challenge before APTEL. We excluded interim orders given that they do not include the outcome of the case. We focused on ten states, including Andhra Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, and West Bengal. These were selected keeping in mind geographical coverage, size of the state, and installed renewable energy (RE) capacity in the state.

We collected information on 26 indicators from the orders, related to the following categories:

1. Time-related: e.g., date of orders, date of impugned order
2. Party-related: names of appellants, respondents
3. Bench-related: e.g., quorum, members' names
4. Subject-matter related: e.g., prayers, issues
5. Outcome-related: e.g., disposition and remand

We processed the text of the orders through LLMs, which we prompted to collect the information by placing reliance on explicit language in the text. After collecting the information for the relevant indicators, we ran verifications based on rules of legal consistency and logic to ensure that the collected information is accurate and reliable. For indicators related to outcome, we have made subjective inferences when the explicit information regarding its outcome was not articulated in the order. We have relied on individual appeals as the unit of analysis, given that outcomes are typically uniform for all parties in an order. We have integrated human verification at every stage of data collection to ensure reliability. Our final dataset consists of 513 orders and 919 appeals. The data is available here.

Methods: Issue categorisation

In order to study the issues that were being agitated before APTEL, we identified themes from the statement of issues in appeals which explicitly articulated them. There were 318 appeals (out of 919) that did not include a statement of issues. After classifying the issues thematically, we decided upon the final categories presented in Table 1 in consultation with practitioners. We ran keyword searches to sort the statement of issues into identified categories and verified the classification by reading the statements when they yielded unclear results for accuracy and reliability.

Table 1: Categorisation of Issues

Issue Category	Coverage
Tariff determination and restructuring	Challenges to tariff determination and adoption under Sections 62 and 63; inadequate attention to principles in arriving at tariff; revision of tariff and truing up.
Contractual disputes	Liquidated damages, outstanding payments, renegotiation or termination of contracts, excluding change in law and force majeure.
Change in law and force majeure	Subset of contractual disputes, relating to change in law and force majeure clauses in the contracts.
Procedural and jurisdictional	Procedural lapses, violation of principles of natural justice, challenges to ERC's jurisdiction.
Open access consumers	Wheeling and banking charges, and issues relevant to open access consumers.
Transmission and grid-related	Connectivity, ISTS and grid-related issues, including compliance with grid code.
Specific compliance with regulations	Mandatory non-tariff-related requirements for obligated entities, such as RPOs and RECs.
Captive status	Captive status of power plants or group captive power plants.
Others	Issues not falling under previous categories, e.g., distribution licensing.

Methods: Limitations

For the categorisation of issues we have relied on the statement of issues as determined by APTEL, in the instances it was explicitly identified in the order. Understandably, analysing the full text of the order will give deeper insights on the litigated questions. The outcomes, such as appeal allowed or dismissed, also do not provide information about outcomes on specific issues. This would entail reading the full orders and making subjective inferences. While the outcomes at APTEL have been used to assess the performance of ERCs, they do not measure the functioning of ERCs holistically, especially because studying the performance of APTEL is beyond the scope of this research.

Results

1. Distribution of litigation

Between the ERCs under study, Maharashtra followed by Karnataka, contribute to the most litigation at APTEL, as represented in Figure 1. These results indicate that the two states have a relatively larger private industry. However our analysis excludes writ proceedings, which are also used as a way to challenge ERC decisions. The total number of orders passed by ERCs is also not available uniformly across the ERCs to accurately calculate the rate of appeal.

Figure 1: Distribution of litigation at APTEL

2. Most litigious issues

ERCs are empowered to decide a wide range of issues. As a consequence, the issues dealt with by the APTEL in appeals are also varied. An appeal may involve more than one issue, and hence the number of issues involved is more than the number of appeals. As represented in Table 2, tariff determination and restructuring are the most litigated upon issues at APTEL across ERCs with the exception of Maharashtra. In Maharashtra, procedural and jurisdictional issues emerge as the most litigious. While the high incidence of such issues is concerning, issues of the procedural and jurisdictional variety can be resolved easily if ERCs invest in capacity building and follow the procedure under the law faithfully.

Our results corroborate the findings of an earlier study (Prayas 2018) which had found that a third of the issues being litigated before APTEL were concerned with tariff. Pertinently, the ERCs have enacted specific regulations related to tariff determination and made the calculation of tariff an exercise which is assisted by detailed delegated legislation. In this context, it is worrying that tariff continues to be the predominant category with regard to appellate litigation.

Table 2: Issue portfolio at different ERCs (Values in percentages)

State	Total Issues	Tariff related	Procedural & Jurisdictional	Contractual disputes	Specific Compliance	Change in law & force majeure	Open access	Trans-mission & grid	Captive status	Other
Maharashtra	248	26.61	32.66	2.82	3.63	3.63	6.85	4.44	16.53	2.82
Karnataka	171	30.41	26.90	22.81	1.75	2.34	6.43	6.43	0.00	2.92
Tamil Nadu	138	28.99	12.32	7.25	20.29	0.72	5.80	7.25	10.87	6.52
Punjab	96	33.33	11.46	15.62	14.58	8.33	7.29	4.17	1.04	4.17
Rajasthan	76	25.00	11.84	19.74	10.53	13.16	5.26	7.89	1.32	5.26
Madhya Pradesh	75	41.33	17.33	13.33	0.00	1.33	9.33	4.00	9.33	4.00
Andhra Pradesh	65	47.69	26.15	9.23	3.08	1.54	1.54	7.69	0.00	3.08
Uttar Pradesh	59	33.90	16.95	20.34	8.47	5.08	1.69	13.56	0.00	0.00
Odisha	49	34.69	16.33	6.12	16.33	0.00	8.16	10.20	6.12	2.04
West Bengal	29	62.07	13.79	3.45	13.79	3.45	0.00	3.45	0.00	0.00

In addition to the most litigated issues, we could also identify the states which contributed most to the litigation of a particular issue at APTEL. Maharashtra contributes the most to issues related to tariff, and procedure and jurisdiction. This outcome is also a function of Maharashtra being involved in the highest number of appeals in our dataset. The findings are presented in Table 3 below.

Table 3: Distribution of Issues

ERC which contributes most to the litigation of a particular issue at APTEL and the percentage share of their contribution

ERC	Issue	Contribution (%)
Maharashtra	Tariff related	20.1
Maharashtra	Procedural and jurisdictional	37.5
Karnataka	Contractual disputes	33
Tamil Nadu	Specific compliance with regulations	34.5

3. Outcomes

We focus on indicators related to the 'disposition' of the appeal from the information we had collected. We scored the performance of the ERCs relative to each other by making the number of decisions that were upheld, overturned or modified by APTEL as the basis of comparison. The results have been compiled in Table 4.

At an outcome level, if an ERC succeeds in defending its decisions, then it would indicate that the orders are well-reasoned, and the ERC follows the procedure under the law. A high overturn rate would indicate weak decision-making capacity.

Table 4: Dispositions at APTEL across ERCs

ERC	Allowed	Dismissed	Partly Allowed	Other	Remanded	Total
Andhra Pradesh	27	32	7	4	11	70
Karnataka	103	49	14	4	67	171
Maharashtra	92	61	31	62	35	246
Madhya Pradesh	22	17	11	8	13	58
Odisha	17	15	17	2	6	51
Punjab	18	28	22	6	13	74
Rajasthan	32	45	7	3	20	87
Tamil Nadu	22	33	19	9	20	83
Uttar Pradesh	15	26	11	5	10	57
West Bengal	4	8	6	4	5	22
Total	352	314	145	108	200	919

_{The categories "allowed", "dismissed", "partly allowed", and "other" are mutually exclusive. That is, if an appeal is allowed, it cannot be dismissed. However, the appeals that are remanded form a subset of either allowed or partly allowed.}

We find that ERCs are differently situated in their ability to defend their decisions at APTEL and the quality and clarity of their orders. Rajasthan found the most success at APTEL, Maharashtra had the least.

Typically, matters are remanded when APTEL is of the opinion that the relevant ERC did not, amongst other things, follow the procedure or frame the issues or determine question of facts sufficiently well. A high remand rate is worrying since it implies that either the ERCs in question are ill-equipped to resolve disputes in the first instance or that APTEL, unless it has insufficient evidence to make the decision, is abdicating its mandate.

Remands lengthen the resolution of disputes and burden regulated entities with legal and compliance costs. This can stymie the growth of the electricity sector, especially in states like Karnataka, for KERC has been asked to reconsider most number of its decisions when compared to other ERCs.

Recommendations

Both APTEL and ERCs are empowered to implement these recommendations.

1. Regularise assessments through use of emerging technologies

We recommend that such comparative assessment exercises be regularised through the use of emerging technologies. The composition of ERCs is constantly changing, and members would benefit from information about the performance of their decisions at APTEL closer to the date of the decisions. This can be made possible by creating a customised tool that leverages LLMs and the competence of researchers and practitioners familiar with the sector.

2. Publish granular statistics

APTEL can improve upon the collection and publication of litigation statistics and include the subject matter of litigation and the relevant laws that are under litigation, amongst other categories, in this exercise. Similarly, while some ERCs publish the number of orders they hear and decide annually, they can include more relevant details in this publication and also publish these at shorter intervals. Collecting this data at source would make the identification of litigious issues, which are often proxies for policy problems, easier.

3. Identify areas for policy reform

ERCs should study the precise reasons for disputes that correspond with the litigious issue categories in their states and respond by changing and adapting their regulations to minimise them. The persistence of tariff as the most litigious category is concerning, given that detailed regulations on calculation and imposition of tariff have been enacted by the regulators.

Conclusion

In summary, we find that:

• Between the ERCs under study, Maharashtra, followed by Karnataka, together contribute to the most litigation at APTEL.
• Issues related to tariff determination and restructuring are the most litigated issues at APTEL across ERCs. This is worrisome given the detailed subordinate legislation that govern the regulation of retail and other categories of tariff.
• ERCs are differently situated in their ability to defend their decisions at APTEL and the quality and clarity of their orders. We find that Rajasthan found the most success at APTEL, while Maharashtra had the least.
• Remands lengthen the resolution of disputes and burden regulated entities with legal and compliance costs. This can stymie the growth of the electricity sector, especially in states like Karnataka, since KERC has been asked to reconsider the most number of its decisions when compared to other ERCs.

References

Amicus Populi? A public interest review of the Appellate Tribunal for Electricity , by Vaishnava S, Chitnis A and Dixit S, 2018, Prayas Energy Group

The authors are researchers at TrustBridge Rule of Law Foundation. They would like to acknowledge and thank Natasha Aggarwal, Madhav Goel, Abhinav Hansaraman, Amol Kulkarni, Praduta Singh, Aparna Jha, Varun Soni, and Gaurav Aswani for compiling, collecting, and verifying the data used in our analysis. We would also like to thank Upasa Borah for helping with verifying, cleaning, and consolidating the dataset.

The authors are researchers at the TrustBridge Rule of Law Foundation.

Households that live within their means in India

by Jay Kulkarni and Susan Thomas.

The economic well-being of households is primarily about their ability to spend on consumption. Household consumption is dominated by what the income of the household is, but not limited by it. Households that spend less than they earn, build their savings. Households that spend more than they earn either borrow or draw down on earlier savings. There is a big difference in the life-cycle possibilities between households that manage to save versus those that do not. In this article, we analyse a panel dataset of Indian households to understand what differentiates households who live within, or beyond, their means.

An often discussed measure of the household's income-consumption dynamic is the `marginal propensity to consume' or MPC, which is the marginal change in consumption for a marginal change in income. The MPC is a valuable part of the toolkit of macroeconomics. An equally important measure is the 'average propensity to consume' (which is abbreviated as APC). This is the fraction of disposable income that the household consumes. The APC shows the income-consumption dynamics of a household in a stated time period. When the APC is below 1, the household is saving, and on average, building up its wealth. There is a clear line between low APC households (i.e. those with APC below 1), who are building up wealth, vs. the households that are not.

In an advanced economy, we think of the APC as a part of life cycle optimisations. When an affluent and financial unconstrained household is young, it builds up savings (i.e. low APC), and then it dis-saves in old age (i.e. high APC). In a poor country, we see many households who are dis-saving even when they are young. Building up wealth versus drawing down wealth takes on a different character in the context of a low middle income economy (Badarinza et al, 2019).

Aggregate facts about household APC, and its covariates, are an important element of understanding India. This article aims to establish such facts. What is the average household APC in India? What fraction of households have a low APC? Do higher income households have a low APC? Do low APC households have lower income volatility? Are low APC households systematically older households? What is the connection between financial inclusion and household APC?

Data and Methodology

The measurement of consumption is an important feature of many government statistical systems. Aggregative statements are derived from the national accounts. The best information about households is found in advanced economies such as the US (Consumer Expenditure Surveys) and the UK (Family Resources Survey), which are observed at annual frequencies.

Less is known about Indian households. In recent times, better measurement of households has commenced in India. One such dataset is the Consumer Pyramids Household Survey (CPHS) published by CMIE, which began in 2014 and now surveys about 200,000 households every year, thrice a year. For this article, we focus on their 2023 and 2024 data.

Computing an APC can be done at different frequencies. In this article, we compute the APC at both monthly and annual data.

Average household APC in India using annual data

We start at the annual APC and establish basic facts. Household data is hard to measure, given difficulties in survey administration, in the interest of the household in offering information, and in the correct recollection by the household. Hence we show a robust estimator of the mean APC across the values obtained for each household. Table 1 reports this value along with other summary statistics. The big fact that we take away is that the (robust mean of the) APC was 0.64 in 2024. If (1 - APC) is the savings rate, this implies a savings rate of 0.33 percent in 2023 and 0.36 in 2024.

Table 1: Distribution of annual household APC in India, 2023, 2024

	25th	50th	75th	Mean	Std.Dev.	Fraction
						with APC<1
2024	0.50	0.65	0.80	0.64	0.33	94.23
2023	0.54	0.69	0.84	0.67	0.74	91.79

 

Going deeper into cross-sectional variation and higher frequency observation

Households may have an annual APC < 1, while having some months where APC > 1. For example, a farming family may be above the water when viewed at the level of the year, but it may earn income only at the Kharif harvest, and run with APC > 1 for all other months. We now define a `Low APC household' as one which lives strictly within its means, where every monthly APC (and therefore the annual APC) is less than 1. Using this definition, we partition the data into Low vs. High APC households.

Table 1 shows that 94.23 percent of Indian households in 2024 are at an annual APC < 1. But when we switch to this modified view of the APC within the year, the picture changes. In this perspective, 54 per cent of Indian households in 2024 are low APC. For 2023, this value was 48 per cent.

We also observe the age of the household head, as well as other household features such as the fraction of members who are dependents and the fraction who are employed. To make numbers comparable, we adjust prices for inflation using an all-India series re-based to December 2024, and use per-capita numbers to account for different household sizes in the sample.

We construct a measure of household income volatility, as the standard deviation of the percentage monthly changes in household income. We construct a financial participation score as in Palta et al (2022). This is the fraction of the number of financial assets households own, out of the 10 that dataset records. The debt status of each household is also separately observed.

We then explore cross-sectional variation by estimating a probit model to predict a low APC household based on the annual data. All explanatory variables are contemporaneous. Figure 1 presents the estimated coefficients from this regression. In this figure, the vertical dashed line indicates the 0 value of the null hypothesis. Any coefficient on the right is positive, and to the left the coefficient which can be used to answer the questions raised above. The distance of the error bars from the 0 value line shows that the coefficient is statistically significant, and influential in the probability of the household being a low-APC household.

Figure 1: Factors affecting the probability of being classified as a low APC household 

 

What do we see here?

• Do low APC households have higher income?
  The coefficient of log income is positive and significant. The higher the income, the higher the probability that the household is low APC.
• Do low APC households have higher income volatility?
  Income volatility has a negative and significant coefficient. This means that higher the volatility of income, the lower the chance of the household being low APC.
• Are low APC households older?
  The age of the head of the household is a proxy for the age of the household. The coefficient for this is close to zero (value of 0.0052) but is positive and significant. Households with older heads tend to be low APC. This income-consumption pattern is consistent with the life-cycle hypothesis of Modigliani and Brumberg (1950), or the permanent income hypothesis of Friedman (1957).
• Do low APC households have a better financial participation score?
  The household financial participation score is a useful way to think about the asset side of the household balance sheet (Ghosh and Thomas, 2022). This coefficient is positive and significant. In addition, the presence of borrowing tends to run in the opposite direction (borrower households are more likely to be high APC).

Discussion

We have a new fact about Indian households: About half of these have at least one month a year where they live beyond their means. Many of the results that we see here are consistent with empirical findings in other countries (Goodman and Webb, 1995, Blundell and Preston, 1998, Gorbachev, 2011, Fisher et al, 2020). Higher income, higher fraction of members employed, higher financial participation score, older households, lower income volatility, lower fraction of dependents, and not having debt, correlate with being a low APC household.

The trajectory of income, savings and wealth by an affluent, financially unconstrained household, operating in a well functioning macroeconomic and financial system is well-established. We expect households to save when they are young, and dis-save when they are old. In the Indian setting, such behaviour is perhaps the privilege of a small number of households who face more complex financial planning problems within the year.

In thinking about households in India, the distinction between households that are adding to their savings versus the households that are not, seems fundamental. It has far-reaching consequences for the life of a household. From the viewpoint of governments and firms, this is an interesting distinction which can be applied when thinking about households. This article is a first look, based on novel mechanisms of measurement, covering two years of data only. More research is needed to obtain insights into the causes and consequences of these phenomena. What is the dynamics of low APC across time? What kinds of households are able to achieve low APC on a sustained basis? How does the build-up of household wealth reshape the decisions of a low APC household?

References

1. Cristian Badarinza, Vimal Balasubramaniam and Tarun Ramadorai, The household finance landscape in emerging economies, Annual Review of Financial Economics, Volume 11, pages 109-129, 2019.
2. Richard Blundell and Ian Preston, Consumption Inequality and Income Uncertainty, The Quarterly Journal of Economics, Volume 113, Number 3, May 1998, pages 603-640.
3. Jonathan D. Fisher, David S. Johnson, Timothy M. Smeeding and Jeffrey P. Thompson, Estimating the marginal propensity to consume using distributions of income, consumption and wealthJournal of Macroeconomics, Volume 65, 2020.
4. Indradeep Ghosh and Susan Thomas, Financial inclusion measurement: Deepening the evidence, Chapter 9, Inclusive Finance India Report 2022, 17th edition, pages 117-125, January 2023.
5. Alissa Goodman and Steven Webb, The distribution of UK household expenditure, 1972-1992, Fiscal Studies, Volume 16, Number 3, pages 55-80, 1995.
6. Olga Gorbachev, Did household consumption become more volatile?, American Economic Review, Volume 101, Number 5, August 2011, pages 2248-70.
7. Geetika Palta, Mithila A. Sarah and Susan Thomas, Measuring financial inclusion: how much do households participate in the formal financial system?, The Leap Blog, 3 July 2022.

Acknowledgments

Jay has just wrapped up his masters in economics from Università Bocconi. Susan is senior research fellow at XKDR Forum. We thank Geetika Palta for help on working with CPHS, and Ajay Shah for positioning and inputs.

Get them to the court on time: bumps in the road to justice

by Mugdha Mohapatra, Siddarth Raman and Susan Thomas.

India's district courts currently face a staggering backlog of 4.6 crore pending cases (as of May 2025): 3.5 crore criminal and 1.1 crore civil. Proposals to solve this are familiar: hire more judges, build special courts, adopt new technology. But before rushing to solutions, it is important to understand where cases get stuck in their journey through courts. We hand-collect and analyse the life-cycle of a sample of cases from district courts, with some surprising observations. First, between 50-70 percent of cases are disposed before they get to trial, which is before the judge hears the substantive matter of the dispute. The time spent waiting for parties to appear is over a year. While criminal cases necessarily require strict adherence to due process, even civil cases face delays. These findings challenge conventional wisdom about judicial delays and point to a unexpected bottleneck. If getting people to show up in court is the core source of delays and pendency, strengthening the administrative processes of the court rather than the size of the bench, could lead to more speedy justice delivery from our courts.

The objective of building judicial capacity to achieve judicial efficiency requires an understanding of how cases move through courts, not just tracking pendency rates. This is because the journey of a case moves through deterministic stages, which vary in duration, and imposes varying resource demands from judges and staff. There have been few systematic studies of how a case moves through court. While some studies examine the total time for case disposal, few break this down by stage.

This study analyses stages for two common types of cases that represent a significant portion of the workload of courts: cheque bouncing cases (criminal matters under Section 138 of the Negotiable Instruments Act) and motor accident claims (civil matters under the Motor Vehicles Act).

Cheque bouncing cases account for 10-15% of criminal court workloads, while motor accident claims constitute over 10% of pending civil cases. Cheque bouncing cases happen when a cheque issued does not deliver payment as expected. Motor accident claims are filed to claim compensation for damages caused in the accident against the owner of the vehicle involved, with the vehicle insurance company as a co-respondent. Cheque bouncing cases are filed in a magistrate court, and the motor accident claims at the Motor Accident Claims Tribunals (MACT). Across these two types of cases, there are differences in procedures: whether it is for criminal and civil cases, and for different types of courts.

We use this analysis to answer the following questions:

1. What fraction of the cases go through the whole life-cycle?
2. How much time is spent in different stages of the case life-cycle? Is this different for civil and for criminal cases?

Methodology

The analysis examined 200 disposed cases randomly sampled from from the e-courts database for district courts from courts across Maharashtra, Kerala, Karnataka, Tamil Nadu, Delhi, Telangana and Rajasthan, filed between 2018-2022. After excluding transfers and circumstances where cases never went a court process, the final sample included 147 cases - 77 cheque bouncing cases and 70 motor accident claims cases.

Each case was tracked through its entire journey by analysing court orders and hearings. Cases go through different stages - filing, admission, summons, warrants, bail, written statements, framing of issues, evidence and others. We classify these different stages of 'Pre-Trial' and 'Trial'. Trial begins after both parties appear before the judge - in cheque bouncing cases, after the accused files for bail; in motor accident claims, after written statements are filed and issues are framed.

Results

1. The first finding relates to the stage at which the cases are disposed. Table 1 shows the number of cases disposed at each stage.

Table 1: Where cases end their journey

Stage	Case type: MV		Case type: S138
	No. of cases	Percentage	No. of cases	Percentage
Pre-trial	38	54 %	55	71 %
Trial	32	46 %	22	29 %

More than half of the cases analysed never reached trial. This is higher for the (criminal) cheque bouncing cases, where 70% of cases are disposed before they reach trial. For the (civil) motor accident claims cases, 54% of the cases are disposed before reaching trial.

2. The second finding relates to the time spent in the two stages

Table 2: Time taken by stage

Case type	Total no. of cases	Pre-trial	Trial
MV	70 (32 reached trial)	9.5 months	4 months
S138	77 (22 reached trial)	12 months	3.5 months

Once all parties are in present in court, cases resolve quickly - usually in 3-4 months. Most of the delay in matters is in the pre-trial stage where the court is waiting for parties to appear (usually the respondent). This takes between 9 months to a year.

These findings align with broader patterns visible in the National Judicial Data Grid for district courts (NJDG). The data shows that 72% of pending cases are stuck before trial: 48% are at the appearance stage, 14% are awaiting service of summons, and 10% are awaiting service of warrants. While the data from the NJDG is useful to know where cases are placed within the judicial system, it does not provide insights on the time spent in different stages. Our analysis quantifies the extent of the bottleneck.

Discussion

The analysis points to two key observations: Most cases that are filed in court do not reach trial, where judicial mind is applied to decide issues of the case. Further, the bulk of the time is spent in getting the parties to court. Once all parties are present, the time to resolution is much lower. The puzzle is in understanding what shapes these features, and how this understanding can be used to improve court efficiency in dealing with case workload.

• Are the delays in court cases inevitable?

The analysis points to the paradox of procedural protections for some cases. Cheque bouncing cases and other criminal matters demand the presence of the accused. This creates an inherent tension between speedy resolution of the matter and judicial procedure. The accused, facing potential imprisonment, has every incentive to delay appearing in court until forced by warrant. The very protections meant to ensure fair process become tools for delay.

In India, these procedures continue to evolve. Under Section 223 of the newly introduced Bharatiya Nagarik Suraksha Sanhita, magistrates must now offer the the accused an opportunity to be heard before admitting a complaint as a criminal case. This involves sending a notice by post, a process not unlike the current summons process. While intended to enhance due process, this additional step could further extend the timeline for cheque bouncing cases. The new code also allows for trial 'in absentia' under Section 356. If a person is declared as a 'proclaimed offender', and if the judge thinks that they are absconding to evade trial, the court can proceed without the accused. How these practices are implemented remains to be seen.

• Administrative and judicial functions of the court

The findings expose a fundamental blind spot in how courts actually work. The popular image of justice - a judge hearing arguments, weighing evidence and delivering verdicts - represents only one aspect of the judicial system. Behind every courtroom drama lies an extensive administrative operation of filing documents, scheduling hearings, maintaining records, and getting parties to court. These two systems complement each other, but our understanding of the administrative aspects of the court system is limited, because it is behind the scenes.

Current reform proposals focus heavily on expanding judicial capacity: hiring more judges, creating specialised courts, and implementing new technologies for case management. While these interventions have merit, they miss the core issue revealed by this analysis. The judicial system extends far beyond judges and courtrooms. Delivering summons and notices typically involves police officers, postal services, or process servers. When the simple act of getting parties to court becomes the biggest bottleneck, the solution requires rethinking the entire administrative infrastructure supporting the courts.

What does imply for potential solutions for institutional reforms of the judiciary? Some approaches that could address the summons/notices bottleneck include:

1. Digital service of summons and notices could reduce delays, though this requires updated legal frameworks and reliable technology infrastructure.
2. Police-court integration might improve warrant execution, though this raises questions about optimal resource allocation - should a capacity constrained police forces pursue cheque defaulters or focus on serious crimes?
3. Quicker escalation to warrants may secure attendance faster, but wielding state power to restrict liberty demands careful consideration. A judge's decision to issue an arrest warrant carries real consequences.
4. Penalties for non-appearance could be introduced to create stronger incentives for timely court attendance.
5. Private process servers, as used in U.S. courts, offer another model worth exploring.

Conclusion

The clamour for court reform has been dominated by traditional solutions: more judges, rewritten procedures, and new technology. But when the relatively simple task of getting parties to court becomes the system's biggest bottleneck, a more nuanced approach is essential. Court reform must recognise that efficient justice delivery requires strengthening both judicial and administrative capacity in parallel. Separating court administration from judicial functions, as some countries have done, could allow specialised focus on each component while maintaining their complementary relationship.

The invisible administrative machinery of courts deserves as much attention as the visible judicial functions. Until administrative capacity matches judicial capacity, Indian courts will continue struggling with delays that have less to do with complex legal reasoning and more to do with basic case management. The path to speedier justice may lie not in the courtroom, but in the clerk's office, the process server's route, and the administrative systems that bring cases to life. Only by addressing both aspects of the judicial system can India's courts deliver the swift justice that 4.6 crore pending cases demand.

Siddarth and Susan are senior research lead and senior research fellow at XKDR Forum. Mugdha was a research associate at XKDR Forum. We thank Pavithra Manivannan for insights, Shubho Roy for help with the interpretation, and Ajay Shah for inputs.

Prepaid Payment Instruments: How has regulation impacted market outcomes?

by Amol Kulkarni and Renuka Sane.

Regulatory interventions often function as de-facto industrial policy, by favouring certain business models over others, effectively picking winners and losers. In this article we present an episode in recent Indian history where regulatory decisions of the Reserve Bank of India on prepaid payment instruments (PPI) significantly influenced competition and product evolution. PPIs are instruments that facilitate the purchase of goods and services, financial services, remittance facilities, etc., against the value stored therein (RBI, 2021). They saw a phenomenal growth of more than 100 times in volumes and more than 25 times in value between September 2012 and November 2024 when volumes had reached 584.78 million and the value Rs. 192.14 billion (RBI, PSI). By this time, the Unified Payments Interface (UPI) volumes and value were more than 25 times and 100 times that of PPI volumes and value. The data suggests that something happened between October 2016 and September 2018, which put the brakes on the PPI growth story and shifted the momentum towards UPI.

UPI enables transfer of funds directly between bank accounts, and does not require parking of funds in non-interest bearing accounts like PPIs. Some may argue that UPI was a superior product that led to reduced interest in PPIs. However, for others, the need to park and transact with only a limited amount in a PPI, ring fences them from larger amounts in a bank account reducing their total risk exposure. Nonbank transaction accounts can also improve access to digital payments for unbanked households (Toh, 2023). The argument that UPI winning over PPIs because the former is a better product would have more credibility if, during the specified period (Ocotber 2016 - September 2018):

• There were no regulatory interventions that adversely affected PPI operations,
• Regulations did not favour UPI,
• Exits of private players from the PPI space were dispersed as more players realised the futility of competing with UPI.

The article argues that this was not the case, and there is reason to believe that the policy and regulatory environment during this period contributed to the slowdown in the PPI growth trajectory, particularly those of non-bank PPIs, and favoured UPI.

The build-up of the PPI market

On 8 November 2016, the Government of India withdrew the legal tender status of Rs. 500 and Rs. 1000 denomination of banknotes issued by the RBI till that date (RBI, 2016). Such large-scale demonetisation gave a fillip for the demand of digital payments. Consequently, the volume of PPI transactions shot up from 127 million in October 2016 to 261 million by December 2016 and steadily rose to around 340 million by March 2017. The value of PPI transactions also surpassed Rs. 100 billion during this period (RBI, PSI). In the months following demonetisation, around 10 entities, all non-banks, received permission from the RBI to issue and operate PPIs (RBI, 2025). The number of non-bank PPI issuers increased from 37 to 55, and surpassed bank PPI issuers for the first (and only) time in this period (RBI, AR).

The draft PPI Master Directions: March 2017

A few months after demonetisation, on 20 March 2017, the RBI issued draft Master Directions on Issuance and Operations of PPIs in India for public comments (RBI, 2017). One of the stated objectives of the draft Master Directions was to encourage innovation in the segment in a prudent manner, taking into account safety and security along with customer protection and convenience.

By this time, three types of PPIs were regulated: semi closed PPIs with minimum KYC, semi closed PPIs with full KYC, and open PPIs. The key difference between semi-closed and open PPIs was that the former could be used to purchase goods and services at specific or clearly identified merchant locations, while the latter could be used for purchase of goods and services at any card accepting merchant location. Cash withdrawal was not permitted through semi-closed PPIs but allowed through open PPIs.

The draft Master Directions proposed two important changes:

1. Increase in the capital and networth requirements: Before the draft, PPI operators were required to maintain a minimum positive net worth of Rs. 1 crore at all times, along with a minimum paid up capital of Rs. 5 crores (RBI, 2016).
2. Limits on monthly fund transfers: Earlier there were no limits on monthly fund transfers. The 2017 draft directions proposed restrictions on the minimum amount outstanding at any point of time, the maximum amount that could be loaded on to a wallet in a month, and the amount that could be transfered out in a month.

Some key proposals of the 2017 draft directions were:

All figures in Indian Rupees

Issue	Semi closed PPIs with minimum KYC	Semi closed PPIs with full KYC	Open system PPIs
Minimum positive net worth to be maintained at all times	25 crores	25 crores	25 crores
Amount outstanding at any point of time	20,000	1,00,000	1,00,000
Maximum amount that can be loaded during any month	20,000	Cash loading limit: 50,000	Cash loading limit: 50,000
Monthly fund transfer limit	10,000	For pre registered beneficiary: 1,00,000 For other cases: 10,000	For pre registered beneficiary: 1,00,000 For other cases: 10,000

There was pushback from stakeholders on the proposals of the draft Master Directions (IGIDR, 2017; CUTS, 2017; IFMR, 2017; NASSCOM-DSCI, 2017). For instance, the Finance Research Group (FRG) at IGIDR called out disproportionate proposals around capital requirements, and transaction limits on consumers, and suggested rolling them back. Specifically, with respect to transaction limits, the FRG pointed out:

The intention for imposing transaction limits and restricting consumers from transacting with their own money is unclear. Every payment system in an economy is susceptible to fraud. However, we do not impose limits on the use of payment systems to pre-empt frauds. For example, the susceptibility of credit card transactions to frauds does not lead us to impose limits on individual credit card transactions. On the contrary, imposing transaction limits on consumers is contrary to their interests.

The final PPI master directions: October 2017

In October 2017, the RBI issued Master Direction on Issuance and Operation of PPIs, after examining comments and feedback received on draft directions (RBI, 2017A). Some key provisions of the Master Directions were:

All figures in Indian Rupees

Issue	Semi-closed PPIs with minimum KYC	Semi closed PPIs with full KYC	Open system PPIs
Minimum positive net worth at the time of application	5 crores	5 crores	5 crores
Minimum positive net worth by the end of third financial year of receiving final authorisation	15 crores	15 crores	15 crores
Amount outstanding at any point of time	10,000	1,00,000	1,00,000
Maximum amount that could be loaded during any month	10,000	Cash loading limit: 50,000	Cash loading limit: 50,000
Cap on amount that could be loaded during a financial year	1,00,000
Monthly fund transfer limit	10,000	For preregistered beneficiary: 1,00,000 For other cases: 10,000	For preregistered beneficiary: 1,00,000 For other cases: 10,000

The Master Directions had reduced networth requirements from Rs 25 crore proposed in the draft to Rs 15 crore. However, additional restrictions were imposed on transaction limits. For instance, the maximum amount which could be loaded during any month in a semi closed PPI with minimum KYC was reduced from Rs. 20,000 to Rs. 10,000. In addition, a new limit on maximum amount that could be loaded in a semi-closed PPI with minimum KYC during a financial year of Rs. 1,00,000 was included in the final directions. It is important to note that this had not found mention in the original draft proposal that was circulated for comments.

This effectively meant that the average amount that could be loaded in a semi-closed PPI with minimum KYC on a monthly basis was Rs. 8,333. Alternatively, for 10 months during a financial year, Rs. 10,000 could be loaded in a semi-closed PPI with minimum KYC every month, but for the next two months, no amount could be loaded, to comply with the annual limits. Coversations with stakeholders suggest that such restrictions potentially frustrated recurring payments and auto-debit mandates which rely on minimum balance being available in a wallet. Further, it restricted the use case of PPIs to very narrow set of transactions.

The impact of regulatory changes: the size of transactions

The proposals in both the draft and final Master Directions had an immediate and severe impact on the PPI market. Figure 1 shows the impact on the PPI transaction volumes, and the turning point when UPI overtook PPIs.

Figure 1: PPI and UPI transaction volumes

Figure 2 shows the impact of Master Directions on the PPI transaction values, and the turning point when UPI overtook PPIs - immediately after these Directions.

Figure 2: PPI and UPI transaction values

However, one must also note that PPI transactions were more than UPI's, for about a year since its launch in May 2016 till about October 2017, when the final master directions on PPIs came into effect. UPI got a fillip due to demonetisation but was still used less than PPIs for several subsequent months. This suggests that PPIs were relevant in a market with UPI.

The impact of regulatory changes: the number and type of players

Figure 3 presents the changes in the number of players in the PPI market. Between March and October 2017, i.e. between the draft and final PPI directions, licenses of seven PPI operators, all of which were non-banks, were cancelled. Of these, four voluntarily surrendered their license, perhaps owing to the restrictive regulatory framework proposed in the draft Master Directions (RBI, 2025). This shows the impact that the draft directions, which also reflected regulator's thinking, had on the the PPI market. Once the directions were finalised, licenses of 20 PPI operators were cancelled by the RBI, all of which were non-banks. Overall, we see that in this period, 16 players voluntarily surrendered their licenses, four ceased operations, five converted themselves to payments banks, and one license was revoked. Further for three years from 2018 to 2020, not a single permission was granted to non-banks for the issuance and operation of PPI (RBI, 2025). Given that licenses were being voluntarily surrendered, one may assume that very few or no fresh applications were received by the RBI. This was also the period during which the government began massively incentivising use of UPI through cashbacks and other schemes (Kulkarni, 2018).

The number of licenses issued went up only in 2021, potentially as a response to the creation of a new category of semi-closed PPI with minimum KYC which could be loaded only through bank accounts.

Figure 3: Non-Bank Licenses issued and cancelled

The regulations led to a shift in the composition of players as well. Earlier, the market saw both bank and non-bank entities offer PPI products. The commercial consequences of the regulatory changes were much larger on non-bank PPIs relative to bank PPIs. Consequently, the number of non-bank PPI operators reduced from 55 in 2016-17 to 36 in 2020-21, while the number of bank PPI operators increased from 54 to 56. In fact, it went upto 62 in 2019-20, possibily indicating the interests that banks retained in offering PPIs, which ideally should have not been the case, if UPI was a superior product. Of the non-bank PPI operators which continue to operate in spite of the regulatory changes in 2017, many are legacy operators enjoying a loyal user base, some are part of larger groups having deep pockets and providing financial or digital services, others have expanded into offerings like digital lending, some offer niche services like foreign exchange, money transfer, and transit payments, while few had to undergo change in management and control.

Figure 4: Bank and non-bank players

Further, non-bank issuers have faced more stringent compliance burdens, particularly around KYC norms, fund loading restrictions, and interoperability requirements. For instance, while non-bank PPIs must maintain an escrow account with a partner bank, bank operated PPIs can leverage their own deposit accounts, reducing costs and operational friction. Additionally, regulatory decisions such as restricting credit lines on PPI wallets have disproportionately impacted non-bank issuers, limiting their ability to innovate and compete with banks that can seamlessly integrate PPI-like functionalities within their broader suite of financial services.

RBI's review of its stringent conditions (late 2019-early 2020)

More than two years after the October 2017 Master Directions, the RBI decided to review some of the stringent conditions imposed on the PPI market, particularly those related to loading of PPIs. In December 2019, it decided to create a new category of semi-closed PPI with minimum KYC which could be loaded only through bank accounts. For such PPIs, the amount which could have been loaded through bank accounts during a financial year was increased to Rs. 1,20,000 i.e. Rs. 10,000 per month could be loaded in such PPIs. The RBI recognised that such leeway was necessary to ensure regular bill and merchant payments (RBI, 2019A). For other semi-closed PPIs with minimum KYC, the annual limit of Rs. 1,00,000 for loading was retained. However, this move appeared to be too little too late and perhaps failed to uplift the momentum in PPIs. Consequently, in January 2020, in addition to bank accounts, credit cards were permitted as a mechanism of loading semi-closed PPIs with minimum KYC having an annual loading limit of Rs. 1,20,000. This move, so far, has also failed to push PPI towards previously experienced growth rates.

Conclusion

The analysis of RBI regulation of PPIs over the past decade, changes in PPI volumes, value, and operators during this period, suggests that regulation has indeed impacted market outcomes for PPIs. While the RBI provided some relaxations, these were not enough to push PPIs back into high growth trajectory.

While it is difficult to pinpoint the exact regulatory requirement which might have impacted the PPI market most, it is clear that the restrictions introduced in October 2017 collectively contributed to a significant decline amongst industry's interest in PPIs as payment instruments. This was validated through interactions with key stakeholders as well.

One reckons that the RBI would have introduced such restrictions in the interests of safety and security of the payments market, prevent fraudulent actors from misusing the instrument, and obstruct unreliable entities from issuing and operating PPI instruments. It might not have predicted that the restrictions could have had such adverse consequences of reducing the attractiveness of PPIs as an instrument, and the users and market players, moving away from the PPI market. It is here where robust public consultations, and ex-ante cost benefits analyses can prove useful to estimate the potential impact of regulatory instruments, avoid disproportionate regulation, and ensure balanced market outcomes. While the RBI did invite suggestions on draft directions in March 2017, several new requirements, such as the annual cap on loading semi-closed PPIs with minimum KYC, were directly incorporated in the final directions of October 2017. This prevented stakeholders from providing their inputs on such new requirements.

The RBI should use tools like public consultations more often and thorougly. In any case, frauds and transaction failures are equally possible with UPI, as recent events have shown. In fact, with UPI, the entire bank balance of the customer is at risk, making them more susceptible than PPIs could ever have been.

Some may argue that with the advent of UPI, PPI was bound to lose market share. However, as this article shows, PPI was restricted by regulations, and did not get an opportunity to effectively compete with UPI, which on the other hand was booming on the back of regulatory relaxations, incentives, and zero fee mandates. One must also not forget that it was the non-banks which propelled UPI to unimaginable heights, and non-banks were also behind PPIs initial growth before the regulations hit them badly.

References

CUTS, 2017: Comments on draft Master Directions on issuance and operations of PPIs in India, 2017, https://cuts-ccier.org/pdf/Advocacy-Comments_on_RBI_Master_Direction_on_Issuance_and_Operation_of_PPIs.pdf

IFMR, 2017: Comments on draft Master Directions on issuance and operations of PPIs in India, 2017, https://dvararesearch.com/wp-content/uploads/2024/01/IFMR-Finance-Foundation-Comments-on-the-RBI-Draft-Master-Directions-on-Issuance-and-Operation-of-Prepaid-Payment-Instruments-in-India.pdf

IGIDR, 2017: Finance Research Group, Inputs on draft Master Directions on issuance and operations of PPIs in India, IGIDR, 16 April 2017, https://ifrogs.org/PDF/201703note_inputsToCpOnPpis.pdf

Kulkarni, 2018: Amol Kulkarni, (Not) the way to promote digital payments, CUTS Discussion Paper, February 2018, https://cuts-ccier.org/pdf/DP_the_way_to_promote_digital_payments.pdf

Mukherjee, 2025: Mukherjee, India: UPI enabled for prepaid payment via third-party apps, Coingeek, 7 January 2025, at https://coingeek.com/india-upi-enabled-for-prepaid-payment-via-third-party-apps/

NASSCOM-DSCI, 2017: Inputs on draft Master Directions on issuance and operations of PPIs in India, 2017, https://www.dsci.in/resource/content/nasscom-dsci-submission-rbi-master-directions-ppis

RBI, 2008: RBI Press Release regarding Inviting Comments on Approach Paper on Guidelines for PPIs dated 7 November 2008, at https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=19419

RBI, 2016: RBI Master Circular dated 1 July 2016 regarding Policy Guidelines on Issuance and Operation of PPIs in India, at https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=10510

RBI, 2016A: RBI Press Release dated 8 November 2016 regarding Withdrawal of Legal Tender Status of Rs 500 and Rs 1000 Notes, at https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=38520

RBI, 2017: RBI Draft Master Directions dated 20 March 2017 regarding Issuance and Operations of PPIs in India, at https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=3325

RBI, 2017A: RBI Master Direction dated 11 October 2017 (updated as of 17 November 2020) regarding Issuance and Operation of PPIs at https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=11142

RBI, 2019: RBI Notification regarding Introduction of a New Type of semi-closed PPIs dated 24 December 2019, at https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11766&Mode=0

RBI, 2019A: RBI Press Release regarding Statement on Development and Regulatory Policies dated 6 December 2019, at https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=48803

RBI, 2021: RBI Master Directions on PPIs dated 27 August 2021 (updated as on 27 December 2024), at https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12156

RBI, 2024: RBI Notification dated 27 December 2024 regarding UPI access for PPIs through third-party applications, at https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12756&Mode=0

RBI, 2024A: RBI Press Release dated 5 April 2024 regarding Statement on Developmental and Regulatory Policies, at https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=57639

RBI, 2025: RBI, Approvals/ Certificates of Authorisation issued by the Reserve Bank of India under the Payment and Settlement Systems Act, 2007 for Setting up and Operating Payment System in India, 9 January 2025, at https://rbi.org.in/Scripts/PublicationsView.aspx?id=12043

RBI, AR: RBI Annual Reports at https://rbi.org.in/Scripts/AnnualReportMainDisplay.aspx. There was a change in financial year from June to March from 2019-20. Also, data of bank PPI issuers for 2015-16 is not available.

RBI, PSI: RBI Payment System Indicators (monthly) at https://www.rbi.org.in/Scripts/PSIUserView.aspx

Toh, 2023: Ying Lei Toh, How Much Do Nonbank Transaction Accounts Improve Access to Digital Payments for Unbanked Households?, Payment System Research Briefing, 29 November 2023, Federal Reserve Bank of Kansas City, at https://www.kansascityfed.org/Root/documents/9919/PaymentsSystemResearchBriefing23Toh1129.pdf

The authors are researchers at the TrustBridge Rule of Law Foundation.

Announcements

IIHS University

The Indian Institute for Human Settlements (IIHS) announces the launch of the IIHS (Institution Deemed to be) University. The University starts off with a set of transformative new interdisciplinary programmes in 2025 – four full-time Master’s programmes and a fully-funded Doctoral programme – centred around urban practice and research.

• Master of Science in Sustainability Science and Practice.
• Master of Science in Climate Change Science and Practice.
• Master of Science in Urban Economic and Infrastructure Development.
• Master of Arts in Urban Studies and Practice.
• PhD in Urban Studies and Practice.

As India undergoes the largest rural-to-urban transition in human history, urbanisation is fundamentally reshaping its economy, society, culture, and environment. Recognising this defining moment, the University is premised on the need to transform the current nature of urban education, one of the most important drivers for India’s national development and sustainable global futures.

Recent graduates and young professionals from varied educational backgrounds or practice domains are eligible to apply.

Interested candidates can express their interest at www.iihs.ac.in; the application portal will open in May 2025.

For queries, you can write to admissions@iihs.ac.in, or contact +91 99012 55788, 96325 20741 (10 am to 6 pm India Time, Monday to Friday). IIHS, Sadashivanagar Campus, Bengaluru 560 080, India and IIHS, Kengeri Campus, Bengaluru 560 060, India.