Entities will be able to program specified expenditures, such as, business travel for their employees. Features like validity period or geographical areas within which CBDC-R may be used can also be programmed
FinTech BizNews Service
Mumbai, 27 December, 2024: The Reserve Bank of India released the “Report on Trend and Progress of Banking in India 2023-24” on 26 Dec, 2024.
Payment and Settlement Systems: Payment Aggregators (PAs)
The Payments Vision 2025 emphasized the need to bring all significant payment intermediaries under direct regulation of the Reserve Bank. In line with the vision, guidelines for regulation of online PAs are proposed to be applied to PA-Point of Sale as well. This measure would bring in synergy in regulation and convergence of standards.
Beneficiary Name Look-up Facility
The facility for the remitter to verify the name of the receiver before initiating a transaction in payment systems like Unified Payments Interface (UPI) and Immediate Payment Service (IMPS) is being extended to cover the Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) systems. This facility will help reduce the possibility of wrong credits and frauds.
Cheque Truncation System (CTS)
The current batch processing approach of cheque processing results in a clearing cycle of up to two working days. To improve efficiency and reduce settlement risk for participants, a proposal to transition CTS to ‘on realization settlement’ is being considered. Under the new approach, cheques will be scanned, presented, and passed on a continuous basis during business hours and the clearing cycle will be reduced to a few hours.
Internationalization of Payment Systems
The Reserve Bank has taken several steps to promote and enhance acceptance of Indian payment instruments globally through initiatives like interlinking the UPI with fast payment systems of other countries and promoting acceptance of RuPay cards globally. Such arrangements have already been operationalized in Singapore, UAE, Nepal, Mauritius, Bhutan, France, Sri Lanka and the Maldives. The deployment of UPI-like payment system is underway in Peru and Namibia. In June 2024, the Reserve Bank joined Project Nexus, a multilateral international initiative to enable instant cross-border retail payments by interlinking domestic fast payment systems of five countries viz. Malaysia, the Philippines, Singapore, Thailand and India, who would be the founding members of this platform.
Adoption of Emerging Technologies
Digital technologies have been instrumental in expanding financial inclusion, improving efficiency, and enabling real-time services across India. Initiatives leveraging technologies such as the Unified Lending Interface (ULI) and Open Credit Enablement Network (OCEN) are expected to redefine credit access, particularly for small businesses and individuals. The Reserve Bank has been supporting innovations to provide seamless and efficient experience for customers. However, the digital shift also introduces risks that must be identified, mitigated and managed to maintain a stable and secure financial ecosystem.
The Reserve Bank convened structured and open interactions with FinTechs at periodic intervals with a view to convey the policy initiatives, understand the new developments, products, services and use cases, and gather market intelligence. The financial sector landscape is witnessing paradigm shifts with the advent of emerging technologies like AI/ML, tokenisation and cloud computing. While the benefits of their adoption are many, the attendant risks like algorithmic bias, explainability of decisions and data privacy are also high.
Central Bank Digital Currency (CBDC)
The CBDC-retail (CBDC-R) pilot currently enables person-to-person (P2P) and person to-merchant (P2M) transactions using digital rupee wallets provided by pilot banks. The programmability and offline functionality in CBDC-R are also being tested under the pilot. Programmability will permit users, including government agencies, to ensure that payments are made for defined benefits. Similarly, entities will be able to program specified expenditures, such as, business travel for their employees. Features like validity period or geographical areas within which CBDC-R may be used can also be programmed. The solutions to enable offline functionality in CBDC-R (both proximity and non-proximity based) for making transactions in areas with poor or limited internet connectivity are also being tested in a closed user group. These functionalities will be scaled up through pilots in a gradual manner.
