From UPI To RTGS, RBI Hopes To Take Local Payment Options Global


From the Unified Payment Interface to the Real Time Gross Settlement system, the Reserve Bank of India hopes to expand the footprint of locally-developed payment systems across borders. Alongside, the regulator may also look to ring-fence local payments by asking that these be processed within India’s borders.

These two steps, along with a host of others, have been put down as part of the RBI’s Payment Vision 2025.

Expanding The Reach Of Local Payment Systems

The potential of UPI has been recognised world over, said the regulator. “Reserve Bank shall actively support the global outreach initiatives to expand the footprint of domestic payment systems by collaborating with relevant stakeholders e.g. central banks, Bank of International Settlements, World Bank, other institutions,” it added.

Apart from UPI, the RTGS system will be streamlined with the internationally accepted standard for crossborder fund transfers. “The feasibility of expanding RTGS to settle transactions in major trade currencies such as U.S. Dollar, Pound, Euro, etc., shall be explored through bi-lateral or multilateral arrangements.”

These steps, if they materialise, could help establish India as a centre for international financial trade by facilitating real time proceeds in foreign currencies.

The road towards such a move won’t be easy. For instance, to facilitate payments to and from other jurisdictions, the feasibility of other central banks maintaining current account and settlement accounts with RBI in rupees will need to be explored. Similarly, RBI will need to examine maintaining accounts with other central banks for the purpose of facilitating direct remittances in foreign currencies.

Ring-Fencing Local Payments

While aspiring to take local payment systems global, the regulator says it will stay watchful on risks to payment systems emerging from geo-political developments.

Presently guidelines are in place for domestic storage of payments data, even though banks and non-bank payment system operators are allowed to process payment transactions abroad, subject to certain conditions.

“Keeping in view the emerging geo-political risks, options shall be explored to ring-fence domestic payment systems, including the need to mandate domestic processing of payment transactions,” said the RBI.

Review Of Payment Charges

The RBI also intends to review charges on digital payments, a process that is already underway. While merchant discount rate is charged on credit and debit card payments, UPI transactions are free.

“While collecting charges from the merchants and / or customers may be required for viability of digital payments, care needs to be taken to ensure that they are reasonable and do not deter digital payments adoption,” said the RBI, adding that a comprehensive review shall be undertaken.

Additional Factor Authentication For Cross-Border Transactions

At present, an additional factor of authentication is required for local digital payments. This has been a predominant factor in safeguarding domestic payments and giving confidence to users in digital payments, said the RBI.

“To give a similar experience and increase safety of international transactions done using cards issued in India, implementing additional factor of authentication for crossborder transactions shall be explored.”

Regulating BigTech, BNPL And More

With technology becoming all-pervasive in finance, the regulator has been forced to expand overnight over non-regulated entities.

“BigTechs and FinTechs play an invigorating role in onboarding new users and customising payment experience. Given their increasingly dominant role in payments ecosystem, a discussion paper on the need for proportionate regulation by the Reserve Bank encompassing domestic incorporation, reporting, data use, etc., shall be published,” said the RBI.

Separately, it added that a review of buy-now-pay-later regulations would also be undertaken.

Towards Central Bank Digital Currencies

The RBI also reiterated that it is working towards a central bank digital currency. A wholesale CBDC is likely to be introduced in pilot phase this year, while a retail CBDC is being explored.

“Various use cases shall be studied and explored to bring in further efficiencies in domestic and crossborder payment processing and settlement using CBDCs,” RBI said.


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