RBI’s Proposals to Foster Innovation, Inclusivity and Efficiency in the Financial Ecosystem

What’s in today’s article?

• Why in News?
• Establishing a Digital Payments Intelligence Platform
• Other Proposals of RBI

Why in News?

• In a bid to bolster the safety and security of digital payments and enhance regulatory frameworks, the Reserve Bank of India (RBI) unveiled a series of proposals in its bi-monthly Monetary Policy Statement.
• The article tries to discuss various proposals of the RBI aimed at fostering innovation, inclusivity, and efficiency in the financial ecosystem.

Establishing a Digital Payments Intelligence Platform:

• Proposal: The RBI has proposed to set up a Digital Payments Intelligence Platform which will harness advanced technologies to mitigate payment fraud risks.
• Constitution of AP Hota committee:
  • To take the initiative of setting up Digital Payments Intelligence Platformforward, the RBI has constituted a committee, under the Chairmanship of AP Hota (former MD & CEO NPCI).
  • The committee will examine various aspects of setting up a digital public infrastructure for the platform and is expected to give its recommendations within two months.
• Need for setting up Digital Payments Intelligence Platform:
  • According to RBI data, domestic payment frauds jumped by 70.64% to Rs 2,604 crore during the six-month period ended March 2024 from Rs 1,526 crore in the same period of last year.
  • The volume of frauds also rose to 15.51 lakh during the March 2024 period from 11.5 lakh in the previous six-month period.
  • The alarming increase coincides with India’s rapid transformation into a digital payments powerhouse, fuelled by the widespread adoption of the unified payments interface (UPI) since its launch in 2016.
    • UPI transactions have seen explosive growth, surging 137% in the past two years to touch ₹200-lakh crore.
    • Hence, the regulatory measures like setting up of digital payments intelligence platform will harness advanced technologies to mitigate fraud risks.

Other Proposals of RBI:

• Raising bulk deposits limit:
  • For commercial banks (excluding RRBs) and small finance banks, the RBI has proposed to revise the definition of bulk deposits as single rupee term deposits of Rs 3 crore and above from the current limit of Rs 2 crore and above.
  • For local area banks, it has proposed to define the bulk deposit limitas single rupee term deposits of Rs 1 crore and above as applicable in the case of regional rural banks (RRBs).
  • Banks have discretion to offer differential rates of interest on the bulk deposits as per their requirements and Asset-Liability Management (ALM) projections.
• Automatic e-mandate for recurring transactions:
  • The automatic replenishment will be triggered when the balance in Fastag or NCMC falls below a threshold amount set by the customer.
  • The current e-mandate framework requires a pre-debit notification at least 24-hours before the actual debit from the customer's account.
  • The RBI has proposed to exempt this requirement for payments made from customer’s account for automatic replenishment of balances in Fastag or NCMC under the e-mandate framework.
• UPI Lite within the ambit of the e-mandate framework:
  • By introducing an auto-replenishment facility for loading the UPI Lite wallet by the customer, if the balance goes below a threshold amount set by him/her.
  • The idea is to do away with the need for extra authentication or pre-debit notification because the money stays with the consumer (moving from his/her account to wallet).
  • The UPI Lite facility currently allows a customer to load his UPI Lite wallet up to Rs 2000 and make payments up to Rs 500 from the wallet.
• Rationalising existing guidelines on export and import of goods and services:
  • This will be in line with the changing dynamics of cross-border trade transactions globally and aims at simplifying operational procedures.
  • This will promote ease of doing business for all the stakeholders.

Q.1. What is the Monetary Policy Committee?

The RBI Act 1934 (as amended in 2016) provides for an empowered six-member monetary policy committee (MPC) to be constituted by the Central Government for fixing the benchmark interest rate in India.

Q.2. What is the National Common Mobility Card (NCMC)?

NCMC is an inter-operable transport card conceived by the Ministry of Housing and Urban Affairs of the Government of India. It was launched in 2019 for enabling the user to pay for travel, toll duties (toll tax), retail shopping and withdraw money.

Source: RBI plans digital payments intelligence platform to curtail frauds | HT | IE