From UPI to RTGS, RBI hopes to adopt local payment options globally

From a unified payment interface to a real-time gross settlement system, the Reserve Bank of India hopes to expand the footprint of locally developed payment systems across borders. In addition, the regulator may also seek to limit local payments by requiring them to be processed within India.

These two steps, along with many others, were postponed as part of the vision to pay for RBI 2025.

Expanding the scope of local payment systems

UPI’s potential is recognized worldwide, the regulator said. “The Reserve Bank will actively support global initiatives to expand the influence of domestic payment systems by cooperating with relevant stakeholders, such as central banks, the Bank for International Settlements, the World Bank and other institutions,” it added.

In addition to UPI, the RTGS system will be streamlined with the internationally accepted standard for cross-border transfers. “The feasibility of expanding RTGS to settle transactions in major commercial currencies such as the US dollar, pound, euro, etc. will be explored through bilateral or multilateral agreements.”

These steps, if implemented, could help establish India as a hub for international financial trade by facilitating real-time foreign exchange earnings.

The road to such a move will not be easy. For example, in order to facilitate payments to and from other jurisdictions, the possibility of other central banks maintaining maintenance and settlement accounts with RBI in rupees will need to be explored. Similarly, the RBI will have to examine the maintenance of accounts with other central banks in order to facilitate direct remittances in foreign currency.

Local fencing payments

Although it seeks to make local payment systems global, the regulator says it will be vigilant about the risks to payment systems posed by geopolitical developments.

Guidelines for the internal storage of payment data are currently in place, although banks and non-bank payment system operators are allowed to process payment transactions abroad under certain conditions.

“Given the emerging geopolitical risks, options for limiting internal payment systems will be explored, including the need to require internal processing of payment transactions,” RBI said.

Overview of payment fees

RBI also intends to review digital payment charges, a process that is already under way. While the merchant’s discount rate is charged for credit and debit card payments, UPI transactions are free.

“While charging fees from merchants and / or customers may be necessary for the viability of digital payments, care must be taken to ensure that they are reasonable and do not impede the acceptance of digital payments,” RBI said, adding that it would a comprehensive review will be undertaken.

Additional authentication factor for cross-border transactions

An additional authentication factor is currently required for local digital payments. This is a dominant factor in protecting domestic payments and giving consumers confidence in digital payments, RBI said.

“In order to provide similar experience and increase the security of international transactions carried out with the help of cards issued in India, the application of an additional authentication factor for cross-border transactions should be explored.”

Regulation of BigTech, BNPL, etc.

As technology became more widespread in finance, the regulator was forced to extend overnight to unregulated entities.

“BigTechs and FinTechs play an invigorating role in introducing new users and personalizing payments. Given their increasingly dominant role in the payments ecosystem, a discussion paper on the need for proportional regulation by the Reserve Bank, including internal registration, reporting, data use, etc. , will be published “, announced by RBI.

Separately, it is added that the regulations for buying now will be reviewed, pay later.

To digital currencies of the central bank

RBI also reiterated that it works for the central bank’s digital currency. Wholesale CBDC is likely to be introduced in a pilot phase this year, while retail CBDC is being studied.

“Various uses need to be studied and investigated in order to bring further efficiency to the processing and settlement of domestic and cross-border payments with the help of the CBDC,” RBI said.

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