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    RBI’s annual report 2023-24: Only 44% growth in digital payments, UPI’s international expansion, use of data, and more

    On May 30, the Reserve Bank of India released its annual report. The report provided a summary of the various regulations implemented by the RBI in 2023-24. It also provided insights into the performance of the payments sector in India, noting that the growth rate of total digital payments has decreased this year compared to 2022-23.

    The report also explores the RBI’s agenda for the following year which focuses on adapting the financial sector to the latest technological developments. This includes the need for regulation and expanding the scope of the burgeoning fintech industry in India. Further, the RBI has also shared its plans to increase the use of data.

    Here are the highlights from the report:

    Payments Landscape in India

    The total payment and settlement systems recorded a growth of 44 % in transaction volume in 2023-24 as opposed to 57.8% in the previous year. In value terms, the growth was 15.8 % in 2023-24 as against 19.2 % in 2022-23. Meanwhile, total digital payments in 2023-24 grew by 44.3% in volume as compared to a 58.3% growth in the previous year. By value, India recorded a 16.4% growth this year on top of a 19.7% growth last year.

    Digital transactions in noncash retail payments increased marginally to 99.8 per cent % this year from 99.6 % in the previous year. The volume and value of retail transactions increased by 44.1 % and 20.1 %, respectively in 2023-24.

    Real Time Gross Settlement (RTGS) transactions increased by 11.3% during 2023-24 in volume terms and 14 per cent in value terms. As of end-March 2024, RTGS services were available through 1,70,855 IFSCs of 247 member banks, while National Electronic Fund Transfer (NEFT) services were available through 1,72,290 IFSCs (Indian Financial System Code) of 233 member banks.

    Further, during 2023-24, the number of Point of Sale (PoS) terminals increased by 14.3 % to 89 lakh terminals, while the number of Bharat QR (BQR) codes deployed increased by 16.1 % to 62.5 lakh codes.

    The RBI also noted that the rapid momentum of online retail and e-commerce, along with their growing adoption in tier 2 and tier 3 centres, drove the overall growth in card transactions.

    UPI: The UPI platform surpassed 13 billion transactions in a single month in March 2024. UPI QR codes increased by 35 % to 34.6 crore by end-March 2024. Further, UPI Lite on-device wallet has been gaining traction and currently processes more than 10 million transactions a month.

    Issuance of new license: During the year, the Reserve Bank accorded Certificate of Authorisation to 22 online Payment Aggregators (PAs), 2 non-bank Prepaid Payment Instrument (PPI) issuers and 1 Trade Receivables Discounting System (TReDS) platform operator, besides granting in-principle authorisation to a few more. Account aggregators grew ten fold, said the RBI.

    Fraud in the year 2023-24

    In total, 2023-24 saw 36,075 instances of fraud, an increase from 13,564 in the previous year. However, the amount defrauded reduced from ₹26,127 crore in 2022-23 to ₹13,930 crore in 2023-24.

    According to the report, frauds have occurred predominantly in the category of digital payments (card/internet). 2023-24 saw 29,082 frauds in card transactions, valued at ₹ 1,457 crore. While 2022-23 saw 6,699 instances of fraud amounting to ₹277 crores.

    Agenda for 2024-25

    The RBI has also highlighted its goals for the upcoming year. Here is the agenda for each sector:

    Fintech

    • Creating a regulatory framework for web-aggregation of loan products
    • Putting in place the framework recognising SROs (Self Regulatory Organisations)
    • Setting up a repository for capturing essential information about FinTechs to discern developments in the ecosystem
    • Expanding Central Bank Digital Currency (CBDC) with new technology and more participants to include offline functionality, programmability, cross-border transactions and tokenisation of assets
    • Exploring CBDC in cross-border payments both on bilateral and multilateral basis as India is the world’s largest recipient of remittances
    • Launching full-scale public tech platform with more financial institutions/data service providers and product offerings
    • Identification of Supervisory and Regulatory technology (Suptech/Regtech) tools to enhance the efficiency and effectiveness of supervision and regulatory compliance in financial services

    Payments

    • Implementing the ‘payee name look-up facility’ in compliance with the newly enacted Digital Personal Data Protection Act, 2023.
    • Enhancing coverage and granularity of published payment transaction data, which it believes will provide useful insights to stakeholders and facilitate research and further innovations in payment systems.
    • Working with NPCI International Payments Ltd. (NIPL) to expand UPI to 20 countries by 2028-29.
    • Exploring Fast Payment System (FPS) collaboration and multilateral linkages with group of countries like European Union and South Asian Association for Regional Cooperation (SAARC)
    • Move away from the SMS-based one-time password (OTP) which is largely used additional factor of authentication (AFA) in the current payments ecosystem. Instead, adopt alternate risk-based authentication mechanisms to address the fraud and friction in payments by leveraging behavioural biometrics, location/ historical payments, digital tokens, and other in-app ways.

    Increased use of data

    • Developing and implementing a standard data query engine (DQE) to allow metadata-based data access and visual analytics
    • Developing a statistical data and metadata eXchange (SDMX) standard for data reporting by major regulated entities
    • Mobile-based app for public access to the Database of Indian Economy (DBIE) portal
    • Developing high-frequency indicators of economic activity using non-traditional data, including non-text data such as satellite imagery data
    • Refining the Reserve Bank’s data governance framework (DGF) by implementing global data quality assessment framework

    Use of Artificial Intelligence (AI)

    The RBI stated,

    “Risk management being integral to the working of central banks, the Reserve Bank is exploring possible applications of artificial intelligence (AI) to manage the complete lifecycle of risk management.”

    Here are the ways the RBI aims to increase the use of Artificial Intelligence in the following fields:

    Supervision

    • Trends and risk identification
    • Anomaly detection
    • Data collection and processing
    • Risk alerts
    • Systemic surveillance

    IT

    • Cyber-security
    • Security operations centre analytics
    • Anti-virus and file scanning
    • Fraud detection
    • Cloud

    Economics, Finance, Statistics, Risk Management

    • Stress testing
    • Financial and non-financial risk management
    • Forecasting of macroeconomic and financial variables
    • Web-scraping and nowcasting
    • Modelling
    • Portfolio management
    • Compilation of data
    • Text mining and natural language processing
    • Alternate data analysis

    Media and Communications

    • Central bank reputation assessment
    • Chatbot
    • Media monitoring
    • News monitoring

    Also Read:

    The post RBI’s annual report 2023-24: Only 44% growth in digital payments, UPI’s international expansion, use of data, and more appeared first on MEDIANAMA.

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