Issue: 021

JUNE 2024

Issue: 021

JUNE 2024

Message from the CEO

Dear readers,

As the RBIH commemorates its third anniversary, we reiterate our commitment to leveraging technology and innovation as the cornerstone of our journey towards driving financial inclusion.

Our initiatives aim to empower individuals and entities alike, offering enhanced accessibility, streamlined processes and deeper insights into the financial sector.

In this edition of Finwrap, we share updates on key developments from domestic and global regulators and the latest advancements in digital innovation, focusing on the adoption of digital currencies and the exploration of technologies like tokenization.

I hope you enjoy reading this issue of Finwrap.

Warm regards,

Rajesh Bansal
Chief Executive Officer
Reserve Bank Innovation Hub

Message from the CEO

Dear readers,

As the RBIH commemorates its third anniversary, we reiterate our commitment to leveraging technology and innovation as the cornerstone of our journey towards driving financial inclusion.

Our initiatives aim to empower individuals and entities alike, offering enhanced accessibility, streamlined processes and deeper insights into the financial sector.

In this edition of Finwrap, we share updates on key developments from domestic and global regulators and the latest advancements in digital innovation, focusing on the adoption of digital currencies and the exploration of technologies like tokenization.

I hope you enjoy reading this issue of Finwrap.

Warm regards,

Rajesh Bansal
Chief Executive Officer
Reserve Bank Innovation Hub

India Fintech News

RBI Launches PRAVAAH Portal, Retail Direct Mobile App and FinTech Repository

On May 28, 2024, the RBI launched three major initiatives, the PRAVAAH portal, the Retail Direct Mobile App and a FinTech Repository.

PRAVAAH (Platform for Regulatory Application, Validation and Authorisation) is a secure and centralised web-based portal for any individual or entity to seek authorisation, license or regulatory approval on any reference it makes to the Reserve Bank.

The Retail Direct Mobile App will allow retail investors to transact in G-secs seamlessly and conveniently using the mobile app on their smartphones.

The FinTech Repository aims to capture essential information about FinTech entities, their activities, and their technology use to understand the sector from a regulatory perspective better and facilitate the design of appropriate policy approaches.

RBI Releases Final Framework for SROs in the FinTech Sector

The RBI has issued a framework for Self-Regulatory Organisations (SROs) for the FinTech sector. The key points of the framework are summarised below:

Characteristics and Operations:

The SRO-FT should operate objectively under RBI oversight, representing the FinTech sector, maintaining independence from any influence, arbitrating disputes, and acting as an information repository to disseminate relevant data.

Characteristics and Operations:

The SRO-FT should operate objectively under RBI oversight, representing the FinTech sector, maintaining independence from any influence, arbitrating disputes, and acting as an information repository to disseminate relevant data.

Eligibility and Membership:

The member for SRO-FT must be a not-for-profit. Membership criteria include representing diverse FinTech entities, voluntary membership, and reasonable, non-discriminatory fee structures.

Functions and Responsibilities:

The SRO-FT guides member conduct, sets standards, promotes responsible innovation, and resolves disputes. Responsibilities include reporting sector developments, helping policy-making, and facilitating RBI interactions.

Governance and Management:

The SRO-FT must adhere to governance principles, ensuring transparency, integrity, and responsiveness. The Board should include independent members, monitor director fit, and report changes to RBI.

RBI Working to make Digital Currency Accessible Without Internet

At the BIS Innovation Summit 2024 at Basel, Switzerland, the RBI Governor, Mr. Shaktikanta Das said that the RBI is working on making its digital currency, the e-Rupee, accessible without being dependent on internet access.

The RBI may use the Central Bank Digital Currency (CBDC) in commercial papers and certificates of deposit on a pilot basis. CBDC, offering the same benefits as cash such as anonymity, ease of use, and settlement finality, can particularly enhance cross-border payments by reducing transaction costs.

It has the potential to advance financial inclusion and offer safer alternatives to private digital currencies, which could pose risks in India.

The country has expanded the use of its digital currency on a pilot basis, with at least 1.3 million customers and 300,000 merchants using it. CBDC usage in India has reached 1 million transactions per day, but people still prefer using instant mobile payment modes like UPI.

CBDC pilots are currently in operation, with a growing number of use cases and participating banks. The proposal aims to broaden access to CBDC-retail by allowing non-bank payment system operators to offer CBDC wallets to a wider user base.

Fintech News

Brazilian Payments Company Ebanx has
Partnered with YES Bank

The strategic partnership between YES Bank and EBANX aims to empower cross-border commerce in India by providing global merchants with seamless access to the Indian market. This will help global merchants access India’s 350 million consumers, the world’s second-largest online shopping market.

This collaboration leverages EBANX’s global expertise in cross-border payments and YES Bank’s digital capabilities to offer scalable payment options, including UPI and local cards, fostering digital inclusion and global trade.

CFIT plans to help CA roll out this Open Finance solution across all its centres to improve productivity and the services that it can offer with available resources.

Barclays and other SME lenders will design and implement Open Finance solutions to accelerate SME credit assessment and loan decision-making.

China Addresses the Property Crisis

China has allocated billions of dollars to bail out its crisis-hit property sector, which has been facing a severe downturn since 2021. The People’s Bank of China has announced a 300-billion-yuan (about $42.25 billion) re-lending facility for the government-subsidised housing project. Local state-owned enterprises are encouraged to use these funds to buy reasonably-priced commercial homes that have completed construction, which will then be used to provide affordable housing.

Additionally, the government has taken other measures to support the property market, such as lowering minimum down payment ratios for individuals’ commercial housing mortgages to 15% for first-home purchases and 25% for second-home purchases.

The primary area of focus will be to increase the speed and integrity of international payments while lowering costs. This partnership will seek to overcome various inefficiencies and challenges faced in cross-border payment systems today.

The Swiss National Bank is Considering Digitising Financial Assets

The Swiss National Bank (SNB) is exploring ways to tokenise financial assets to make payments more secure and efficient. This involves the digital representation of claims on financial assets on a programmable platform, typically relying on distributed ledger technology.

The SNB is currently involved in a pilot project called Helvetia III, which allows tokenised central bank money to be used to settle transactions. This project has already been used in four bond issuances by the Swiss local government.

Tech in Focus

Tokenisation and its Potential Benefits to Financial Service Providers:

Tokenisation is the process of replacing sensitive information, such as credit card numbers, with unique codes called “tokens,” creating a digital representation of the original data. This method protects the real data by making it useless to unauthorised users and allows for secure and efficient processing of large amounts of data.

Tokenisation digitises assets, streamlining transactions on a blockchain. While assets are held in custody, tokens are created for instant exchange and can be used internally or governed by smart contracts. This innovation accelerates deals, enables automated settlements, and fosters financial innovation.

Source: Ebizcharge.com

Here is a real-life example of how tokenisation works:

When a customer provides payment details, they are replaced with a randomly generated token by the merchant’s payment gateway. This tokenized data is encrypted and sent to a payment processor, while the original information is securely stored in a token vault. The processor re-encrypts the tokenized data before final verification.

The technology behind tokenisation:

Tokenization involves several techniques to replace sensitive data with tokens. These include cryptographic hashing, random number generation, and ciphering functions.

Cryptographic hashing

This method uses mathematical algorithms like SHA-256 to transform data into a fixed-size string of characters, which cannot be reversed to reveal the original data.

Random number generation

It creates unique and unpredictable tokens that are stored in a lookup table for later comparison.

Ciphering functions

It uses encryption algorithms to generate tokens that can be decrypted with a specific key, allowing for reversibility if needed.

Tokenization creates value by reducing transaction costs and delays, unlocking liquidity by fractionalizing traditionally illiquid assets, and enabling swift, secure cross-asset transactions between blockchain-based and traditional financial systems.

RBIH Updates

3 Years of Innovation Series

RBIH completed its third anniversary and unveiled a ‘3 Years of Innovation’ series which highlighted some of its most impactful initiatives.

These initiatives include Swanari, Digital Innovation of SHGs, Rural and Agri Finance, the Public Tech Platform for Frictionless Credit and the Fintech Incubation & Acceleration Programme.

RBIH stands strong in its mission to transform innovation in India’s financial ecosystem and enable frictionless finance for a billion Indians.

Bank-Fintech Demo Day

RBIH hosted its ‘Bank-Fintech Demo Day’, a first-of-its-kind event bringing banks and fintechs together. The initiative aimed to encourage greater collaboration within the ecosystem to better serve the banking and financial needs of a billion Indians

Launch of ‘At the Helm: Women Entrepreneurs Transforming Middle India’

RBIH launched ‘At the Helm: Women Entrepreneurs Transforming Middle India’, a white paper on woman entrepreneurship in tier 2 and 3 cities in India, in collaboration with SALT – mysaltapp. This report was the result of extensive primary research and interviews with over 300 women entrepreneurs.

It highlights the gaps in funding for women’s entrepreneurship in India and suggests measures to plug these gaps.

This research will help financial institutions identify problem statements and craft gender-intentional financial products, enabling frictionless finance for a billion Indians.