MUMBAI: The Reserve Bank of India (RBI) is considering the possibility of giving non-bank players, such as fintech and insurance companies, direct access to processing RTGS and NEFT transactions in line with global best practices.
Citing the examples of the banking regulators of England and Switzerland, the RBI said in its Financial Stability Report that an easing of access to Centralised Payments Systems (CPS) to nonbanks in India will reduce costs and make market access to funds easier.
“The Reserve Bank will examine the case for increased participation of non-banks in CPS,” the RBI said in the biannual report. “Internationally, central banks are expanding access to payment systems by enabling various types of non-banks to become members.”
Currently only standalone primary dealers, clearing corporations, central counterparties, retail payment system organizations, select financial institutions such as NABARD, Export-Import Bank of India (EXIM Bank) and Deposit Insurance and Credit Guarantee Corporation (DICGC) can access these systems.
Furthermore, the central bank also said that it is considering the possibility of introducing New Umbrella Entities (NUE) for retail payment systems to function along with the National Payments Corporation of India (NPCI).
“Over a decade, the National Payments Corporation of India (NPCI) has performed as the sole umbrella organization for retail payment systems in India,” the central bank said. “Availability of NUE offering products which will lead to the redundancy of existing systems can, besides addressing concentration risk, also encourage competition and innovation, thus contributing to financial stability.”
Such a competitive setup may not only reduce the systemic risks of having a single large entity processing nearly 60% of all retail electronic payments, but will also enhance the reach of digital payments to a larger number of people and thereby reduce the dependency on cash, the banking regulator said.
Source- Economic Times.