Fintech’s 2023 Revolution: RBI’s Game-Changing Moves

  • The Reserve Bank of India (RBI) has implemented several transformational measures for the fintech sector in 2023.
  • Key developments include guidelines for digital lending, enabling Unified Payments Interface (UPI) for international transactions, the introduction of Central Bank Digital Currency, the regulation of cross-border payments for fintechs, and the establishment of a fintech regulatory framework.

The RBI has been instrumental in shaping the fintech sector through various innovations, with several key announcements in 2023 further changing the landscape of the industry.

Digital Lending

The introduction of First Loss Default Guarantee (FLDG) guidelines is expected to improve digital lending by managing credit risks and encouraging lender participation. This scheme aims to provide a safety net for regulated entities and online lending service providers against potential losses resulting from borrower defaults, thereby boosting transparency and investor confidence.

UPI for Cross-Border Transactions

NPCI International Payments Limited has partnered with foreign payment systems to facilitate UPI payments in countries like Singapore, UAE, Mauritius, Nepal, and Bhutan. These cross-border transactions aim to significantly cut costs associated with international money transfers.

Central Bank Digital Currency

RBI has launched the e-Rupee, the central bank’s virtual currency. Leveraging the Unified Payments Interface (UPI), RBI has started facilitating Central Bank Digital Currency (CBDC) transactions through UPI QR codes, empowering merchants to accept digital rupee (e₹) payments through customers’ CBDC wallets.

Cross Border Payment Guidelines

RBI has introduced rules for payment aggregator cross-border (PA-CB) licenses, making them mandatory for entities providing cross-border payment services. Non-bank PA-CBs are required to register with India’s Financial Intelligence Unit (FIU-IND) before applying for authorisation.

Fintech Regulatory Framework

RBI has announced plans to create a fintech repository operational by April 2024 or earlier, to better understand the developments in the fintech ecosystem. The repository will be managed by the RBI’s Innovation Hub and fintech companies will be encouraged to voluntarily contribute information.