RBI to create a new fintech department to drive innovation

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Bangalore: After establishing a financial technology unit in 2018, the Reserve Bank of India (RBI) announced that it will now create a separate fintech department given the rapidly changing industry landscape.

In an internal circular, the central bank said it had decided to create the department to further focus and facilitate innovation in India’s fintech sector. “As a result, a new department was created as of January 4, 2022, integrating the fintech division of DPSS, CO. The department will not only promote innovation in the sector, but will also identify the challenges and opportunities associated with it and address them in a timely manner, ”RBI said in the circular.

DPSS is the payment and settlement systems department, which works, among other things, on policy development and licensing of payment and settlement system operators in the country.

In addition to identifying challenges and opportunities, the new FinTech department will also provide a framework for further research on the topic that could help central bank policy interventions, RBI said in the circular, which ET has examined.

“Accordingly, while issues related to facilitating constructive innovations and incubations in the FinTech sector, which may have broader implications for the financial sector / markets and fall within the remit of the Bank, will be addressed by the financial technology department, ”he mentioned.

According to the central bank, the fintech department will be administratively attached to the centralized administrative division (CAD) of the central office.

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The fintech industry has faced several regulatory changes as new age startups enter the financial services industry. Last month, RBI extended the card tokenization deadline – from January 1, 2022 to June 30, 2022 – after several companies and industry bodies said they needed more time to make the necessary changes.

Under the new rules, online merchants are not allowed to store users’ card details on their platforms. This aims to reduce online payment fraud, but will also increase friction in online payments, with users having to re-enter their card details with every purchase.

Before that, in October, recurring card payments saw a disruption, with customers having to re-authorize standing instructions for recurring payments or online subscriptions up to Rs 5,000.

In 2020, the central bank released a framework for new umbrella entities (NUEs) to increase competition in digital payments. The move saw several industry heavyweights, from Tatas to Reliance, and new-age companies such as Paytm and Ola, apply for the license.

Recently, RBI also made the decision to allow payments up to Rs 200 through offline channels, without the need for an active internet connection.

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