RBI must deal more with consumers, review rules impacting them: CUTS talks

Experts at discussion say approach favouring of banks over consumers may make the latter move away from the digital economy towards cash

At an online discussion organised by Consumer Unity and Trust Society (CUTS) International on the issue of evaluating consumer welfare in digital payments, several industry stalwarts discussed the way forward for India's banking regulator.

“The Reserve Bank of India needs to engage with consumers and clearly explain the rationale and impact of its regulations,” said Montek Singh Ahluwalia, former Deputy Chair, Planning Commission of India.

The discussion reviewed a recent Reserve Bank of India (RBI) circular that prohibits continuation of frictionless e-mandates from modes like debit cards from October 2021, if conditions mentioned therein are not complied with by industry stakeholders, particularly banks.

Aruna Sharma, former Secretary, Government of India, questioned whether RBI was worried about the convenience of consumers or banks. She cautioned that an approach favouring of market players over consumers may make them move away from the digital economy towards cash.

It was pointed out that RBI's action of increasing friction in digital payments is likely to hit vulnerable consumers, including digital novices and those with disabilities. This is likely to further increase the digital divide and pose challenges to the Government’s vision of an equitable digital society.

Pradeep S Mehta, Secretary General, CUTS International, noted that RBI's actions have forced consumers to choose between convenience and security of digital payments, which should not be the case.Consumers should be free to choose the modes of making digital payments, the amount which they are comfortable in transacting without additional authentication, and whether to securely store card details with merchants or not.

Akash Karmakar, Partner, Panag and Babu, said the RBI has not prescribed any consequences for non-compliance by banks, who have little incentive to comply with conditions of the circular. Bhargavi Zaveri, Doctoral candidate, National University of Singapore, highlighted the importance of friction free digital interfaces and pointed out that friction can lead to consumers abandoning transactions mid-way.

Ashish Aggarwal, vice president and head, public policy, NASSCOM, suggested that the regulator could provide weekly updates in terms of compliance by banks with its circular, and should work more closely with stakeholders to ensure consumer welfare is not compromised.

Close to 100 stakeholders participated in the discussion, including representatives from government departments, policy influencers, regulators, think tanks, consumer groups, academia and media.