The Reserve Bank of India (RBI) has allowed eight firms with their innovative technologies to progress to the ‘test phase’ for cross border payments, while six other firms completed their test phase for retail payments, the central bank said in separate statements.
These experiments with new technologies are conducted under regulatory sandboxes, or, in a tightly controlled environment in small groups where every parameter is measured and analysed.
These long period studies are called ‘cohort’ studies. After a product passes the cohort stage, it enters the second cohort or the test phase. The test phase can also come after two cohorts.
The products are far from being the finished products that can be used by the general public. Only when they produce satisfactory results in mutually agreed test scenarios and expected outcomes set under the regulatory sandbox, the product is allowed to progress to the next phase. Upon clearing the cohorts and the test phase, the RBI takes a call whether these can be “considered for adoption by regulated entities subject to compliance with applicable regulatory requirements.”
In a statement, the central bank said six entities, out of 32 that had applied for new technology in retail payments, have completed their test phase.
Similarly, in case of cross border payments, eight entities, out of 26, have now been allowed to enter the test phase after completion of the second cohort. The test phase for them will begin from the third week of September.
India is the largest recipient of inbound remittances across the globe accounting for 15 per cent of global share. In 2019, India received $83 billion and in the first half year of 2020, has received $27.4 billion in remittances. Further, the daily average turnover of OTC foreign exchange instruments in India is approximately $40 billion.
“The Cohort is expected to spur innovations capable of recasting the cross-border payments landscape by leveraging new technologies to meet the needs of a low cost, secure, convenient and transparent system in a faster manner," the RBI had announced during the announcement of the second cohort on December 16, 2020.