- RBI is working toward phased implementation of Central Bank Digital Currency (CBDC) in both the wholesale and retail sectors
- RBI earlier released the Regulatory Sandbox framework in August 2019
- RBI has established the Reserve Bank Innovation Hub (RBIH) as a subsidiary in Bengaluru
Shri Shaktikanta Das, Governor, Reserve Bank has shared his view that Fintech ecosystem will serve as a force multiplier in India. Dr Das was speaking at Global Fintech Festival in Mumbai, earlier this week on 20th September
The pandemic accelerated India’s push toward digitalisation, particularly in rural areas. From March 2020 to August 2022, UPI transactions increased by 427 percent, reaching a new high of 657 crore transactions in August 2022 alone. The number of UPI QR code enabled payment acceptance points increased by approximately 9 crore (86% YoY) to 20 crore by the end of July 2022, reflecting the increasing acceptance and preference for contactless payments.
According to the World Bank, at least 58 developing-country governments have used digital payments to provide COVID-19 relief. Scale of operations in India was much larger than in other countries. According to the Global Findex Database 2021, there has been a significant increase in financial inclusion around the world. In developing countries, 71% of people now have bank accounts, up from 42% a decade ago. Approximately 40% of people made a digital payment from their account for the first time since the pandemic began.
The Reserve Bank of India (RBI) has been actively working toward phased implementation of Central Bank Digital Currency (CBDC) in both the wholesale and retail sectors. This is expected to give the digital ecosystem a boost.
In order to foster innovation, RBI earlier released the Regulatory Sandbox framework in August 2019. RBI has thus joined the select group of countries that have their own regulatory sandbox ecosystem. Following four theme-based cohorts on retail payments, cross-border payments, MSME lending, and financial fraud prevention. It reflects RBI strong desire to expand the footprint of FinTech innovation.
Among the success stories from our Regulatory Sandbox initiative are the ‘Framework for Facilitating Small Value Digital Payments in Offline Mode’ and the recently launched UPI123Pay, which aimed to improve digital financial inclusion by allowing over 40 crore feature phone users to access the benefits of UPI in a safe and secure manner.
The Reserve Bank of India (RBI) has established the Reserve Bank Innovation Hub (RBIH) as a subsidiary in Bengaluru. The Hub is governed by an eminent Board of Directors comprised of private sector and domain experts. The RBIH is currently working on a number of significant projects and innovation hub will establish itself as a centre of excellence in the future.
FinTechs help to improve efficiency in service delivery and reduce costs, and they can play transformative roles in credit delivery in collaboration with traditional lenders.
Dr Said highlighted that The Reserve Bank and the Reserve Bank Innovation Hub collaborated to further digitalize Agri Finance in India, enabling frictionless delivery of Kisan Credit Card (KCC) loans in a paperless and hassle-free manner. This initiative will also reduce turnaround time and eliminate the need for multiple visits to bank branches. The Reserve Bank Innovation Hub has created a complete digital process for easy and quick access to rural credit.
Governor Das also raised material concerns about the unbridled proliferation of digital lending apps. The need of the hour is to ensure assurance of safety after the regulated entities have completed a process of green-lighting (whitelisting) and due diligence. The RBI, in collaboration with other relevant agencies, is addressing this issue and will take additional steps as needed.
Galactik Views