RBI announces six key measures to strengthen India's banking, fintech, payments ecosystems

Draft guidelines for the above four proposals are released for public consultation, with final frameworks to be issued following stakeholder feedback. Pic/ PTI

To strengthen India's financial ecosystem, the Governor of the Reserve Bank of India (RBI), Sanjay Malhotra, announced six additional measures focused on banking regulations, fintech and payment systems on Wednesday.

These initiatives were revealed by the RBI governor while announcing the Monetary Policy initiatives.

This will complement the existing Asset Reconstruction Company (ARC) route under the SARFAESI Act, 2002, and aim to deepen the secondary market for distressed loans.

Currently, co-lending arrangements are restricted to only priority sector loans by banks and Non-Banking Financial Companies (NBFCs), but they will now be extended to all regulated entities for all loans, priority sector or otherwise.

According to ANI, the RBI will issue comprehensive prudential and conduct regulations for gold loans to ensure consistency across regulated entities and account for their varying risk-bearing capacities.

The central bank also plans to harmonise the regulations governing non-fund-based credit facilities, such as bank guarantees and letters of credit, across financial institutions.

Additionally, the RBI intends to revise guidelines on partial credit enhancement (PCE), a step aimed at expanding funding avenues for infrastructure projects.

Draft guidelines for the above four proposals are released for public consultation, with final frameworks to be issued following stakeholder feedback.

The fifth announcement is that the National Payments Corporation of India (NPCI) will be empowered to set transaction limits for Unified Payments Interface (UPI) person-to-merchant transactions in consultation with banks and relevant stakeholders, which will benefit higher-value digital payments in the retail ecosystem, as per ANI.

To promote continuous innovation, the RBI will make its Regulatory Sandbox framework theme-neutral and 'on tap'.

This will enable FinTech and other entities to apply at any time without waiting for themed cohorts, encouraging more agile experimentation and faster adoption of emerging technologies.

The RBI Governor stated, "The other two announcements relate to enabling NPCI to decide, in consultation with the banks and other stakeholders, the transaction limits in UPI for person to merchant transactions; and making the Regulatory Sandbox theme-neutral and 'on-tap. ' Necessary directions for the implementation of these two measures shall be issued separately," reported ANI.

(With inputs from ANI)