The Reserve Bank of India (RBI) believes that the rise of emerging technologies such as blockchain, artificial intelligence/machine learning (AI/ML), as well as new products such as tokenized assets, have pushed lawmakers to remain vigilant and seek appropriate safeguards.
“The most disruptive change happening in the world is the use of technology. This has certainly made our lives easier in an unprecedented way, but it has also led to the growth of an entire ecosystem that thrives on this massive awareness,” said Mr. Rajeshwar Rao, Deputy Governor of the RBI, in his speech at a “High-level global policy conference of central banks from the South.
The conference, organized by the RBI as it celebrates the 90th anniversary of its establishment, was part of the central bank’s efforts to develop meaningful dialogue and foster cooperation on issues facing banks central countries of the South.
“The advent of new processes supported by blockchain and AI/ML, new products like tokenized assets and new entities like BigTechs/FinTechs have required policymakers to remain on their toes,” Rao said.
“We do not want to stifle such progressive practices, but we must provide appropriate safeguards to ensure the stability of the system. Finding a balance between innovation and prudence is therefore going to be a challenge,” he added.
Rao’s comments come as India aims to become a digital powerhouse while leveraging emerging technologies as a catalyst for economic growth. However, the world’s fastest-growing major economy recently reported an unprecedented rise in digital payment fraud.
Data from RBI’s annual report shows digital payments fraud in India hit a record Rs 14.57 billion ($175 million) in the financial year ending March 2024 (FY 2023-24) . Card or internet frauds accounted for around 80% of total banking and financial frauds in FY 2023-24, compared to around 49% in the previous year (FY 2022-23). However, frauds reported in one year could have occurred several years before the reporting year.
To strengthen digital payments while ensuring they are secure against fraud, the RBI has constituted a committee to look into various aspects of setting up a ‘digital payments intelligence platform’. The platform will leverage advanced technologies to mitigate the risks of payment fraud.
“Today, digital payments infrastructure facilitates over 160 billion transactions annually worth over ₹2.4 trillion (FY 2023-24),” Rao said.
“Retail digital transactions are worth over ₹720 trillion, of which around ₹265 trillion is facilitated by indigenous UPI and IMPS alone. This data gives us insight into the journey we have taken from relatively humble beginnings to becoming a global leader, particularly in the area of digitalization,” he added.
UPI has seen a tenfold increase in volume over the past few years, from 12.5 billion transactions in 2019-20 to 131 billion transactions in 2023-24, accounting for 80% of all digital payments volumes. As a result, India is looking to expand the Unified Payments Interface (UPI) to more countries and carry out real-time interbank transactions using mobile phones available across the world.
“As the system becomes more complex, financial products and services also evolve accordingly. Therefore, regulated entities must manage a tricky quadrant of expectations, which means enabling rapid digitalization; reinforce the need for enhanced cybersecurity; ensure robust KYC standards; and above all maintain excellence in customer service,” explained Rao.
The RBI uses blockchain technology for its central bank digital currency (CBDC). Although the central bank has not set a target date for its full rollout, new use cases for e-rupee are emerging daily.
The RBI also acknowledged increased mention of artificial intelligence-related technologies in the annual reports of public sector banks. Previously, private sector banks were more proactive towards AI.
For artificial intelligence (AI) to operate within the law and thrive in the face of increasing challenges, it must integrate an enterprise blockchain system that ensures the quality and ownership of data capture, enabling it to protect data while also ensuring immutability. of data. Check out CoinGeek’s coverage on this emerging technology to find out more why enterprise blockchain will be the backbone of AI.
Watch: ‘Disruptive’ blockchain can be useful for India
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