The Reserve Bank of India has created a specific department for fintech challenges. This will include two challenges that are already being faced by the bank- framing cryptocurrency regulations and a Central Bank Digital Currency (CBDC).
The move by the Reserve Bank of India (RBI) comes a fortnight after reports about India’s framing of crypto regulations. The reports said that “while the RBI is adequately staffed with specific departments to discharge these tasks, it still does not have a fintech department, just a division, leaving questions about efficiency and long-term commitment unanswered.”
The RBI is working on two types of central bank digital currencies (CBDCs), wholesale and retail. The new department will also now be tasked with overseeing the CBDC development. Meanwhile, India’s parliament is set to consider regulations of cryptocurrencies in the region. The RBI has unsuccessfully tried to “prohibit” banks from dealing with crypto exchanges in the past.
Ajay Kumer Choudhary will oversee the new department. He has been appointed by the RBI as executive director, saying he “will look after Fintech Department, Risk Monitoring Department and Inspection Department.”
“You can expect much more action from Mr. Ajay Kumar Choudhary towards the Central Bank Digital Currency. This may signify a shift from the RBI’s stance towards fast tracking CBDC piloting,” said a source who is close to the matter.
Experts have long complained that India’s institutions did not have an adequately equipped and dedicated team focused on fintech challenges.
“It’s a positive signal of intent to build real regulatory capacity to oversee the fast-paced fintech industry,” said Vivan Sharan, a technology and policy expert who has worked with the government in the past.
Sharan added, “It is also a reflection of the central bank’s desire to deepen digital payments through a focus on innovation, and a recognition of the growing importance of various forms of digital money that will require supervisory bandwidth.”
The RBI had formed a FinTech Unit in the Department of Regulation in 2018. The department was to act as a central point of contact in the bank for all activities related to fintech.
Supposedly, the upgrading of that unit into its own department will encourage innovation in the sector. It will also identify the challenges and opportunities associated with it and address them in a timely manner. The new department will aos provide a framework for further research on the subject that can aid policy interventions by the bank.
“All matters related to the facilitation of constructive innovations and incubations in the Fintech sector, which may have wider implications for the financial sector/markets and falling under the purview of the Bank, will be dealt with by the FinTech Department,” said the document.
