Fintech

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2 min read

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January 10, 2022

The New Reserve Bank Of India (RBI) Fintech Department

Interested in knowing about the new fintech department created by RBI? Check this article to get full information on RBI's fintech department & know why it was created!

Way back in 2018, the Reserve Bank of India (RBI) set up a financial technology unit due to the rapid change in the fintech landscape. Now, in 2022, a separate fintech department is being set up by the RBI for further rapid changes in this sector. 

It looks to tackle two major challenges head-on: 

  1. Framing cryptocurrency regulations
  2. Central Digital Bank Currency (CDBC)

“Accordingly, a new department has been created with effect from January 4, 2022, by subsuming the fintech division of DPSS, CO. The department will not only promote innovation in the sector, but also identify the challenges and opportunities associated with it and address them in a timely manner,” RBI said in an internal circular.

New additions and frameworks being worked on

The new fintech department will be identifying challenges and opportunities and also provide a framework for further research on the subject of policy formation and authorization of payment and settlement system operators in the country, among other things.

Further, matters related to the facilitation of “constructive innovations and incubations in the fintech sector” will be handled by this department. 

Two types of CDBCs are being worked on by the RBI:

  • Wholesale
  • Retail

The new department will oversee their development. 

Simultaneously, regulations on cryptocurrencies will be determined by the Parliament following the unsuccessful attempts by the RBI to “prohibit” banks from dealing with cryptocurrency exchanges in the past. 

Why the new department was created

There have been many regulatory changes in the fintech sector as more and more startups enter. Some of these include: 

  • RBI extending the deadline for card tokenization from January 1, 2022, to June 30, 2022 
  • This was done after several companies said they needed more time to make the necessary changes
  • Online merchants being barred from storing users’ card details on their platforms
  • This was done to prevent online fraud but will also lengthen the process of online payment
  • Customers having to reauthorize standing instructions for recurring payments or online subscriptions up to Rs 5,000
  • The release of a framework for new umbrella entities to increase competition in online payments

These have all played their part in reshaping the fintech sector of India. 

For a long time, experts had complained about how inadequately equipped India’s institutions are to handle the growing crypto-sphere. This department aims to mitigate those concerns and facilitate more growth in the Indian fintech sector. 

Conclusion

The rapid growth of the financial technology sector of India needs support and the creation of the fintech department in the RBI is the perfect embodiment of that support. 

Though it will take time for India to reach the heights other more financially developed countries have reached, this is definitely a step in the right direction.

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