India central bank updates on fintech adoption, plans regulatory sandbox

Excerpts from speech by Reserve Bank of India governor Shaktikanta Das at FinTech Conclave 2019, organized by think tank NITI Aayog, New Delhi, 25 March 2019

The Reserve Bank of India has over the years encouraged greater use of electronic payments so as to achieve a “less-cash” society. Banks have been the traditional gateway to payment services but with the fast pace of technological changes, this domain is no longer the monopoly of banks. Non-bank entities are cooperating as well as competing with banks, either as technology service providers to banks or by directly providing retail electronic payment services. The regulatory framework has also encouraged this enhanced participation of non-bank entities in the payments domain.

A recent global survey from EY ranks India second in terms of fintech adoption, with an adoption rate of 52%. It is reported that there are as many as 1218 fintech firms operating in India, which have created a large number of jobs.

RBI has been using suptech for data collection and analysis. The examples are Import Data Processing and Monitoring System (IDPMS), Export Data Processing and Monitoring System (EDPMS) and Central Repository of Information on Large Credits (CRILC), to name a few. Also, the risk-based supervision of banks is extensively data-driven and is an example of suptech. The future of regtech and suptech technologies, however, lie in big data analytics, artificial intelligence, machine learning, cloud computing, geographic information system (GIS) mapping, data transfer protocols, biometrics, etc.

Going forward, the Reserve Bank will set up a regulatory sandbox, for which guidelines will be issued in the next two months. The Reserve Bank’s working group on fintech and digital banking suggested the introduction of a “regulatory sandbox/innovation hub” within a well-defined space and duration to experiment with fintech solutions, where the consequences of failure can be contained and reasons for failure analyzed.

Read the full speech

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