RBI seeks to mandate national processing of payment transactions
The Reserve Bank of India is seeking to mandate domestic processing of payment transactions. Currently, guidelines are in place for domestic storage of payment data, but banks and non-banks are allowed to process payment transactions overseas under certain conditions.
“Bearing in mind emerging geopolitical risks, options are being explored to protect national payment systems,” RBI said in its Payment Vision 2025 document.
Under current regulations, there is nothing prohibiting the processing of payment transactions outside India. However, the data will only be stored in India after processing. Full end-to-end transaction details must be part of the data.
If the processing is carried out overseas, the data must be deleted from the overseas systems and brought back to India no later than one business day or 24 hours after the payment has been processed, whichever comes first. The same should only be stored in India. Experts have said that if RBI mandates national processing of transactions, many multinational payment entities may find it difficult to comply. “Many payment companies initially did not meet data localization standards, so if they are to start processing transactions also in India, they may have to make more investments here, which can make operations expensive,” said an industry expert.
This comes even as the RBI explores ways to expand the footprint of Indian payment systems by collaborating with the World Bank and other global financial institutions. For example, the RTGS system currently settles domestic remittance transactions on a gross basis. RBI now wants the system, which operates under ISO 20022 to meet national requirements, to be streamlined with the internationally accepted standard for cross-border money transfers. “The feasibility of extending RTGS to settle transactions in major trading currencies such as USD, Pound, Euro, etc., should be explored through bilateral or multilateral arrangements. expect the arrangements to provide real-time foreign exchange earnings to traders and make the country a major center for international financial exchanges,” the RBI said.
Rajesh Mirjankar, MD and CEO of Kiya.ai, a digital solutions provider, said, “The Payments Vision 2025 is progressive and aims to make India a payments powerhouse globally. One of the most important forward-looking initiatives is the global reach of RTGS NEFT and Rupay UPI Cards with internationalization, where bilateral treaties with nations covering especially USD, GBP and Euro will greatly benefit Indian residents and their counterparts abroad with online production at a lower cost. costs.”
June 19, 2022