How Does the Reserve Bank of India Promote FinTech?

Reserve Bank of India Promote FinTech

The Reserve Bank of India is doing a lot to promote FinTech in its country. Here’s how.

India’s FinTech industry has been booming over the last several years, with the highest adoption rate in the world, at 87% in 2020. During the same year, the Indian FinTech market was valued at INR 2.3 trillion (approximately US$30 billion), and estimates predict a 24.56% compound annual growth rate (CAGR) between 2021 and 2026. 

Increased use of smartphones, greater access to the internet, relaxed taxation, copious funding by the government, demonetization and promotion of digital payments have all propelled India’s FinTech growth. As the rapid surge in online transactions and digital banking continues, the Reserve Bank of India (RBI), India’s central bank, has taken steps to ensure the safety of digital monetary systems while promoting FinTech innovation in the country. 

India’s FinTech history

Most FinTech firms were founded as unregulated entities at the beginning of India’s FinTech revolution, without guidelines or directives that would ensure the safety of consumers. To better regulate the industry, the RBI set up a separate internal FinTech unit under the Department of Regulation in 2018, but it wasn’t very efficient.

So, in 2019, the RBI composed a framework to provide structure for regulators to better engage with the FinTech ecosystem and construct responsive regulation for FinTech firms. At this point, the RBI mainly aimed to increase innovation and competition in order to bring down the cost of financial services. They wanted to boost financial inclusion and equitability between socioeconomic classes. 

The new FinTech department in RBI

In January 2022, an internal RBI circular announced the creation of a new FinTech department under the Department for Payment and Settlement Systems (DPPS). The new department is responsible for matters related to the FinTech industry’s inter-regulation and international coordination.

This means the department will cover FinTech issues related to other countries or sectors. Additionally, the agency is tasked with addressing matters related to innovative FinTech when they have greater implications for overall financial markets. Although it might not be the first item on its agenda, the department will also be overseeing cryptocurrency and other challenges surrounding crypto.

Recent changes by RBI to boost the economy with FinTech

Earlier in January, the RBI allowed offline digital payments up to INR200 (US$2.65) per transaction, which was a move attempted to boost such payments in semi-urban or rural areas. In this mode, payments can be carried out face-to-face using any channel or instrument, including cards, wallets and mobile devices, without requiring any authentication. Offline transactions are expected to drive digital transactions in areas with weak internet, which, as mentioned, correspond to rural/semi-urban areas.

Later again, on March 24, the RBI inaugurated a new innovation hub, aiming to boost innovation in the financial sector. The new Reserve Bank Innovation Hub (RBIH) is an RBI-owned subsidiary, and according to RBI governor Shaktikanta Das, the hub will mentor selected FinTech start-up firms in an attempt to speed up the innovative process. 

What the future holds for FinTech in India

How critical a role the innovation hub will play in India’s FinTech industry can only be discerned with time. Yet, it is clear that the RBI aims to grow the industry for India to compete against other superpowers on a global scale. The relatively broad oversight that the RBI and RBIH have on the industry makes it more likely that Indian FinTech companies will grow tremendously in the next several decades. It is exciting to see what the future holds for one of the most rapidly growing emerging markets in the world, especially in such a novel industry.

Also read:

Header image by Unsplash

SHARE THIS STORY

Share on facebook
Share on twitter
Share on linkedin
Share on email

RELATED POSTS

How Organizations Can Cope with Change

How Organizations Can Cope with Change

It is almost inevitable that you will experience some changes in the workplace during your career. Be it through digitalization or employee restructuring—businesses need to keep themselves ahead of the curve by quickly adapting to change.

What LaMDA’s “Sentience” Means for AI

What LaMDA’s “Sentience” Means for AI

With the advent of self-driving cars and artificial intelligence (AI) artists, AI is getting closer and closer to replicating human capabilities each day. However, there is one thing that separates humans from AI—emotional intelligence or sentience. Or, at least, so we thought.
In June this year, Google software engineer Blake Lemoine came out with the claim that Google’s AI chatbot LaMDA (short for language model for dialogue applications) had become sentient.

PLC Ultima A Cryptocurrency for Mass Use or a Scam

PLC Ultima: A Cryptocurrency for Mass Use or a Scam?

In December 2021, a new contender entered the cryptocurrency market. Going by the name PLC Ultima (PLCU), the currency was just valued at US$0.10 when it first came into existence. To put this into perspective, 6000 cryptocurrencies had been launched in 2021, taking the total number of cryptos in the market from 10,000 to 16,000.

Budget Southeast Asia Getaways for Entrepreneurs

5 Budget Southeast Asia Getaways for Founders

As an entrepreneur, you’re always on the go, pushing yourself to the limits and working hard to achieve your goals. While starting your own business can be incredibly rewarding, you need to take some time off from time to time. Not just for your mental health—though that’s important, too—taking a break from having to constantly juggle life, work and family obligations 24/7 also helps keep those creative juices flowing.

Top 7 Luxury Watches to Invest in 2022

Top 7 Luxury Watches to Invest in 2022

This year, luxury watches overtook Bitcoin and vintage cars to become the most coveted investment option among the three. Though watch prices have fallen since the infamous crypto crash, they are still significantly up from their prices in 2019. In fact, during the pandemic, people used their saved up money to invest in watches, including Rolex and Patek Philippe. Renowned watch brands caught everyone’s attention as their resale values surged.

Art Theft The Disturbing New Issue on NFT Platforms

Art Theft: The Disturbing New Issue on NFT Platforms

The dark side of the non-fungible tokens (NFTs) market started to reveal itself after NFTs became mainstream last year. Previously, we have explored how the NFT marketplace is riddled with scams, such as artist impersonations and insider trading. Not only have such hoaxes become a big issue for buyers hoping to get their hands on genuine artist works but also for the artists themselves.