RBI's vision 2021 looks at a 'cash-lite' society, cyber security, and more

Highlights need for a self-regulatory organisation in the digital payment space

The Reserve Bank of India (RBI) on Wednesday released its statement on ‘Payment and Settlement Systems in India: Vision 2019–2021’, which outlined the measures that the central bank will undertake to foster innovation, cybersecurity, financial inclusion, customer protection, and competition.

The Payment Systems Vision 2021 envisages achieving a ‘highly digital’ and ‘cash-lite’ society through the goalposts of competition, cost-effectiveness, convenience, and confidence, said the RBI.  

Based on inputs from various stakeholders and guidance of the Board for Regulation and Supervision of Payment and Settlement Systems, the report consists of 36 specific action points with 12 specific outcomes.

The RBI has highlighted the need for a self-regulatory organisation for the digital payment space, which can serve as a two-way communication channel between the players and the regulator. The organisation will also work towards establishing minimum benchmarks, standards, and help discipline rogue behaviour.

The number of digital transactions is expected to increase more than four times, from 20.69 billion in December 2018 to 87.07 billion in December 2021. The digital payment transaction turnover vis-à-vis gross domestic product (at current market prices) is expected to further increase to 10.37 per cent in 2019, 12.29 per cent in 2020, and 14.80 per cent in 2021. 

The RBI expects accelerated growth in individual retail electronic payment systems, both in terms of number of transactions and increased availability. Payment systems like Unified Payments Interface/Immediate Payment Service are likely to register average annualised growth of over 100 per cent and National Electronic Funds Transfer at 40 per cent over the vision period, it said.

The RBI will take measures to increase the penetration of acceptance infrastructure in the country. The infrastructure will be upscaled to at least six times of the present levels in the next three years’ time, it said.

The central bank will finalise a framework to encourage competition in existing payment systems and a review would be undertaken to consider authorisation of new players including one/few pan-Indian umbrella organisations. 

The RBI said it will release a framework that will specify the minimum entry requirements for any payment organisation. It said that the policy for payment system authorisation has been liberal since it was at a nascent stage, but entry conditions are necessary due to the growth of the digital payment space. The central bank will also look into the need for existing authorised payment players to essentially have a physical presence in India for operating payment systems.

In order to have a coordinated approach towards regulation, the RBI shall engage with the other sectoral regulators — Securities and Exchange Board of India, Insurance Regulatory and Development Authority, Telecom Regulatory Authority of India, etc to remove friction in regulation and ease system operator and customer comfort, it said.

The RBI will also consider implementation of e-mandates/standing instructions for retail payment systems, subject to customer protection and adequate safeguards like authenticating payment instrument registration, mandating transaction limits, segments, etc.