RBI Governor vows to make UPI, RuPay 'truly global'

Reserve Bank of India (RBI) Governor Shaktikanta Das at the Global FinTech Fest on Wednesday highlighted that the RBI is working towards making the Unified Payments Interface (UPI) and RuPay "truly global". He emphasised the progress already made in making UPI and RuPay global, with deployments in countries like Bhutan, Nepal, Sri Lanka, Singapore, the UAE, Mauritius, Namibia, Peru, and France, among others. He explains that through central bank digital currencies (CBDCs), the RBI is now leveraging programmability to deliver credit or government aid to landless tenant farmers, as well as carbon credits to other farmers.

Das noted CBDC interoperability with systems like UPI and ongoing experiments with offline solutions. He mentioned the RBI's openness to collaborating with other countries on CBDC developments. He states that Digital Public Infrastructure (DPI), which includes frameworks like Aadhaar, UPI, and online bill payments, will make the financial system work better. These tools will help connect different systems, make things more transparent, and save money, he adds.

He emphasised that ensuring robust consumer protection is crucial for enhancing trust in the financial system. Das noted that despite the benefits of green bonds and deposits, these financial instruments face challenges, particularly in terms of scalability. He pointed out that the market for green bonds needs to expand to attract larger issuances and a more diverse set of investors. “Technology can play a pivotal role in overcoming these challenges. Blockchain technology, for instance, can enhance transparency and traceability in green bond issuances and provide immutable records of project impacts,” says the RBI governor.

Addressing the challenges of ensuring the authenticity and impact of green projects financed through green bonds and deposits, Das underscored the need for robust monitoring and reporting mechanisms. He added that technology could play a pivotal role in overcoming these challenges. He highlighted recent RBI initiatives, including the Sovereign Green Bonds framework and the Green Deposits framework, as key to financing green projects and promoting sustainable practices.

Das proposed three major focus areas: setting priorities for India@100, exploring technologies for the future, and developing the regulatory architecture for FinTechs. He states that the financial sector is rapidly digitalising, creating both opportunities and challenges. “While all of us strive to enhance financial inclusion, optimise digital payments and harness emerging technologies like blockchain and artificial intelligence, we also confront the inherent unpredictability and interconnectedness of the global financial system. Financial institutions and FinTech startups alike must, therefore, adapt swiftly, leveraging agile strategies and robust frameworks to capitalise on the new opportunities while mitigating the connected risks.”

For India@100, Das proposed five key priorities for the future of the financial system: financial inclusion, digital public infrastructure, consumer protection and cybersecurity, sustainable finance, and global integration and cooperation. “This journey will be marked by a dynamic shift in technology, regulation, geopolitics and growing societal expectations. It is up to the stakeholders in the Indian financial ecosystem to foster economic resilience,” says Das.

Das stated that publicly available information indicates that approximately 11,000 FinTech companies have been founded in India. He mentioned that the country's fintech sector has attracted around $6 billion in investments over the past two years. He emphasised the need for financial institutions and fintech firms to adopt robust frameworks to capitalise on new opportunities and manage risks effectively.

In terms of Digital Financial Inclusion, Das suggested that FinTech companies should aim to offer innovative and accessible financial services, bridging gaps in traditional banking with digital payment solutions, microloans, and affordable insurance. He mentioned that these companies could enable access to financial services in remote areas through mobile banking apps, digital wallets, and online lending platforms, providing safe customer experiences. Data analytics and AI were also mentioned as tools for providing personalised and efficient financial solutions.

Das highlighted the pilot of the Unified Lending Interface (ULI), formerly known as the Public Tech Platform for Frictionless Credit (PTPFC), which aims to enable lending institutions to offer frictionless, end-to-end digital credit by leveraging consent-based data and related services. He mentioned that around 50 such data services are currently available on the platform, and efforts are underway to include other lenders like cooperative credit institutions through the NABARD (National Bank for Agriculture and Rural Development). He indicated that a full-scale launch of ULI would be done in due course.

Additionally, he cited the Reserve Bank’s Financial Inclusion Index rose to 64.2 in March 2024 from 53.9 in March 2021. Further, he also highlighted the success in providing banking access to every village within a 5 km radius or hamlet of 500 households in hilly areas, with 530 million Jan Dhan bank accounts opened under a national mission, 66% of which were in rural or semi-urban centres and 55% with women beneficiaries.

Regarding regulatory architecture, Das stated that the sustainable and orderly development of the fintech sector requires balancing innovation with prudence. He emphasises that the goal is to craft regulations that maintain this balance while ensuring trust, security, accessibility, risk management, and competition.

The RBI governor notes that balancing innovation with regulation can be achieved through self-regulation within the fintech sector. Self-Regulatory Organisations (SROs), composed of industry participants familiar with sector-specific challenges and opportunities, can offer practical guidance to regulators. SROs facilitate open communication and keep fintech companies informed about regulatory expectations through regular consultations, feedback mechanisms, and policy dialogues.