Reserve Bank of India Announces Plans for Cloud Facility and Fintech Repository to Enhance Financial Sector Efficiency.

December 9, 2023: In a significant move to bolster the Indian financial sector, the Reserve Bank of India (RBI) has unveiled plans to establish a dedicated cloud facility aimed at ensuring the security of financial sector data while enhancing scalability and business continuity. The announcement was made by the central bank on Friday.

The Indian Financial Technology and Allied Services (IFTAS), a wholly-owned subsidiary of the RBI, will spearhead the setup and initial operation of the cloud facility. Subsequently, the facility will be transferred to a separate entity owned by participants within the financial sector, according to the RBI.

Additionally, the RBI is set to operationalize a fintech repository by April 2024 through the Reserve Bank Innovation Hub. This repository will serve as a comprehensive database containing information about fintech companies’ activities, products, technology stack, and financial details. It is noteworthy that participation in providing information for this repository will be voluntary for fintech companies. The data collected will be utilized for policy-making purposes, as stated by the RBI.

RBI Deputy Governor T Rabi Shankar emphasized that the decision to establish a public cloud was driven by the aim of increasing efficiency, particularly for smaller entities and cooperative banks. While dispelling notions of data sovereignty concerns, Shankar highlighted the potential for substantial efficiency gains, streamlining database management for various entities within the financial sector.

The RBI’s announcement also included plans to issue a draft circular inviting public comments on a regulatory framework for connected lending across all regulated entities. Additionally, web aggregators of loan products (WALP) will be subject to a comprehensive regulatory framework, focusing on transparency, customer centricity, and informed choices for borrowers.

The central bank disclosed that it had increased the transaction limit for Unified Payments Interface (UPI) payments to hospitals and educational institutions from ₹.1 lakh to ₹.5 lakh. Furthermore, for e-mandates related to mutual funds, insurance premiums, and credit card bills, transactions up to ₹.1 lakh will no longer require additional authentication, expanding the limit from the current ₹.15,000.

While the RBI’s initiatives aim to fortify the financial sector’s technological infrastructure, questions remain about the structure and functioning of the new entity that will eventually control the cloud facility and how it might represent the diverse landscape of financial sector participants.