We missed this earlier.

B.P. Kanungo, Deputy Governor, Reserve Bank of India, said that the central bank favoured competition and innovation in every field including payments systems and allowing non-banks into the payment ecosystem was done to foster this. He said that the central bank giving the go-ahead to non-banking entities to set up PPIs and establish while label ATMs, helped create innovation and that this will guide the regulatory philosophy in the coming years as well. This is in stark contrast with the Ratan Watal Committee report, which recommended the formation of a Payments Regulatory Board (PRB) which would regulate payments in the country. The PRB would look at regulation of payments independent from the function of central banking. The PRB can be formed by making the Board for Payment and Settlement Systems more independent by introducing members from outside the RBI.

The Watal Committee pointed that payments systems run by the RBI to favour banks: “The most notable distortion in the market, is the case of RTGS, NEFT and NECS, where the RBI performs both commercial functions, as well as regulatory functions. This leads to a conflict of interest, and goes against the principles of competitive neutrality.” It was also reported in the press that the central bank had other reservations on some of the committee’s recommendations like data and consumer protection and Separation of banking and payments.

Quest to improve digital payments

Speaking at the National Payments Corporation of India (NPCI) National Payments Excellence Awards function in May, the deputy governor, among other things, highlighted some aspects of digital payments that ought to be improved going forward. Explaining that the RBI gets many complaints related to failure of transactions, Kanungo said that in India, especially when new users are being initiated into digital transactions, if their early experience is less than wholesome, “they are put off, and fall back on non-digital means.” He also claimed that while an elaborate machinery is in place for redressing banking-related customer complaints, the same cannot be said about redressal of complaints in the digital space and needs to be put in place.

Kanungo also stressed on improving consumer awareness not only on the various payment options and features available but even on the grievance redressal mechanisms available. He noted that this digital/financial illiteracy transcends across all geographies and regions, including rural, semi-urban, north and south. He went on say that the staff at the front desks of bank branches are also equally ignorant on matters concerning digital financial transactions. “Are we doing enough to educate the public? Should it be the responsibility of the regulator alone? The answer is no,” he said.

The Deputy Governor then wondered if country might be having too many products in the payments space; some of which have possibly outlived their utility. The market and users should encourage some consolidation in this regard —exit routes for some of these payment service providers and products should be ‘actively pursued’, he suggested. He, however, conversely noted that the payment systems in India which are amongst the best in the world. He attributed this to the collaborative efforts of all stakeholders.