Here are three major announcements from RBI's first bi-monthly monetary policy statement this financial year which influences how payment platforms, including banks and digital wallets will operate in India.
Payments data to stay within Indian borders
RBI has dictated all digital payment operators in India ensure that data related to payment transactions in the country should remain within the borders. According to RBI, the announcement has been made to enhance the security of Indian payment systems which are getting more and more interoperable. Payment technology platforms, particularly the ones working across multiple nations such as Whatsapp payment, Paypal, etc. will have to make strict changes to comply with this RBI diktat within the next six months.
“In recent times, the payment ecosystem in India has expanded considerably with the emergence of new payment systems, players and platforms. Ensuring the safety and security of payment systems data by adoption of the best global standards and their continuous monitoring and surveillance is essential to reduce the risks from data breaches while maintaining a healthy pace of growth in digital payments,” said RBI in its monetary policy.
Banks under RBI asked to cut support to cryptocurrencies
Another major announcement which will have a major impact on the digital payments space is that the central bank has directed all banks and e-wallets operating under RBI's regulation to cut ties with organizations dealing in cryptocurrencies and other related crypto assets. RBI has allowed a window of three months to stop crypto-related operations and says this regulation has been made to protect consumer interests as well as curb illegal activities such as money laundering which can be done using virtual currencies.
"Virtual currencies (VCs), also variously referred to as crypto currencies and crypto assets, raise concerns of consumer protection, market integrity and money laundering, among others. In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling virtual currencies." stated RBI. The official circular on the matter is yet to be released.
RBI working on central bank virtual currency
While RBI may have announced its plans to thwart decentralized currencies like Bitcoin, it has proposed work on its own centralized virtual currency. The apex bank has praised blockchain and gone ahead to constitute an inter-departmental group which will work on introducing an RBI-issued virtual currency. The central bank says that an official virtual currency would circulate in addition to fiat paper money. According to RBI, a blockchain-based currency would benefit the nation by making India's monetary system efficient and reduce exchange of funds for illegal activities, in addition to saving costs of printing paper currency.
"While many central banks are still engaged in the debate, an inter-departmental group has been constituted by the Reserve Bank to study and provide guidance on the desirability and feasibility to introduce a central bank digital currency," said B P Kanungo, one of the RBI's Deputy Governors during in a public statement.