RBI seeks feedback on payment charges
On August 17th, the RBI released a “Discussion Paper on Charges in Payment Systems” which is open for public feedback until October 3, 2022. The paper is a comprehensive, excellent resource on the components of India’s digital payments ecosystem. Around 40 questions have been raised covering RTGS, NEFT, IMPS, debit and credit cards, PPI, UPI, intermediaries, convenience fees and other charges. The RBI has clearly stated that it has neither taken any view nor has any specific opinion on the issues raised in this discussion paper.
The first public feedback came from the Ministry of Finance in a tweet on Sunday night (August 21st) stating that UPI is a digital public good, will remain free and the government is committed to providing financial support towards this end. However, Vishwas Patel, Chairman Payments Council of India tweeted in reply immediately that the government support given so far has not been passed on by the banks. A few days later, NPCI instructed apps not to collect charges for payments through BBPS. Read Monisha Purwar in the Financial Express on the debate around charges for UPI.
Even with zero charges for customers, the phenomenal success of UPI in popularizing digital payments has not touched the vast swathes of India. There are of course new offline and feature phone modes being pushed by NPCI like UPI123Pay – the latest is RBI's approval to Crunchfish and HDFC Bank to test an offline retail payment solution in the Regulatory Sandbox. Indradeep Ghosh, Dvara Research has written on the way forward using digital payments to advance financial inclusion, where he points to two main challenges to overcome – unfavourable economics in reaching the poor and ill-suited digital payment interfaces. Further, an effective grievance redressal system is critical for digital payments to lead to financial inclusion of majority Indians.
The RBI released its report on the implementation of recommendations of the Working Group on digital lending. Detailed instructions were set out by the RBI in a circular, with November 30 as the deadline for compliance by registered entities. The overarching principle behind the guidelines is to promote innovation, while restricting scope for exploitation of customers. However, as Jaspreet Kalra writes, the guidelines are set to change business models by limiting the kind of information fintech platforms can collect. There are also several dissenting voices in industry claiming that heightened compliance will deter the growth of digital lending, and put a spanner in inclusion through innovation.
It's a tough line to tread for a regulator but finally, we seem to be looking towards a space where customers are better protected, even as the pace of lending may slow down.
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Pradhan Mantri Jan Dhan Yojana (PMJDY) celebrates eight years of successful implementation and the government has released interesting insights in this press note.
The RBI has initiated a pilot project for end-to-end digitalisation of Kisan Credit Card (KCC) lending, developed by the Reserve Bank Innovation Hub (RBIH).
Maya Vengurlekar, COO, CRISIL Foundation, writes in The Economic Times on the importance of financial independence of rural women and shows the way for companies and governments to work together towards this goal.
Shayan Ghosh and Gopika Gopakumar cover the history of policy on payment charges in the Mint.
Boston Consulting Group (BCG) and Matrix Partners India brought out a report on India’s fintech market, noting that it has received $29 billion in funding across 2,084 deals to date (January 2017-July 2022), gaining 14 per cent share of the global funding and No 2 spot on the deal volume.
Meha Agarwal has a comprehensive report out in Inc42 Media on the recently released Reserve Bank of India (RBI) guidelines on digital lending, including views from several industry voices.
Eric Duflos and Gerhard Coetzee, CGAP, have written a detailed blog post on “Rethinking Consumer Protection: A Responsible Digital Finance Ecosystem”.
Queen Maxima, United Nations Secretary General's Special Advocate (UNSGSA) and Honorary Patron of the G20 Global Partnership for Financial Inclusion (GPFI), met Finance Minister Mrs. Nirmala Sitharaman and lauded India's advanced digital public goods infrastructure for financial and economic inclusion.
Navin Surya writes in Business Standard on the path to greater financial inclusion in the world, as India has shown the way.
CGAP has a reading deck out on how Banking as a Service (BaaS) can catalyze financial inclusion, as non-banks can offer banking services under their own brand.
Sai Krishna Kumaraswamy and Alice Nègre, CGAP, authored a technical note, looking at the rural agent Cash-In-Cash-Out (CICO) network to push through adoption of digital financial services.
Devraj Hom Roy and Vishes Jena, Microsave Consulting, write on how financial institutions can provide digital financial services to the elderly.