Unused Zero-Balance, Jan Dhan Accounts to Be Closed by Banks from Feb 1

Starting February 1, 2026, banks in India will close three categories of long-unused accounts under new RBI rules. These include dormant zero-balance accounts, inactive Jan Dhan accounts, and unclaimed deposit accounts, all aimed at reducing fraud risks and streamlining the banking system.

Key Details of RBI’s Revised Directions

• Effective Date: February 1, 2026
• Scope: Applies to all banks across India
• Accounts Affected:
  • Zero-balance accounts with no activity for years
  • Inactive Jan Dhan accounts opened under financial inclusion schemes but unused
  • Unclaimed deposit accounts with balances untouched for 10+ years (funds transferred to RBI’s Depositor Education and Awareness Fund)

Why RBI Is Closing These Accounts

• Fraud Prevention: Dormant accounts are often exploited for money laundering or scams.
• System Efficiency: Clearing unused accounts reduces administrative burden and improves digital banking infrastructure.
• Customer Protection: Ensures unclaimed deposits are safeguarded under RBI’s DEA Fund.

What Account Holders Should Do

• Check Your Accounts: Log in to net banking or visit your branch to confirm activity.
• Reactivate Dormant Accounts: A simple transaction (deposit/withdrawal) can prevent closure.
• Update KYC: Ensure your account details are current to avoid being flagged as inactive.
• Claim Old Deposits: Approach your bank before funds are transferred to RBI’s DEA Fund.

Risks if You Ignore This

• Permanent Closure: Once closed, reopening may require a fresh application.
• Loss of Access: You may lose linked services (debit cards, auto-pay mandates, etc.).
• Funds Transfer: Unclaimed balances will move to RBI’s DEA Fund, requiring a formal claim process later.

Quick Comparison of Account Categories

Account Type	Criteria for Closure	Action Needed by Customer
Zero-balance accounts	No activity for years	Make a small deposit/transaction
Jan Dhan accounts	Unused since opening	Use account actively or close voluntarily
Unclaimed deposits	No operation for 10+ yrs	Claim funds before transfer to DEA Fund

Action Plan

• Step 1: Review all your accounts, especially older savings or Jan Dhan accounts.
• Step 2: Make at least one transaction before January 31, 2026 to keep them active.
• Step 3: If you suspect unclaimed deposits, contact your bank immediately to initiate the claim process.

RBI Sets New Minimum Balance Rules for Bank Accounts, Effective January 15, 2026

The Reserve Bank of India (RBI) has announced new minimum balance requirements for bank accounts, effective January 15, 2026. Savings account holders must now maintain ₹5,000 in metro cities, ₹3,000 in semi-urban areas, and ₹1,000 in rural regions, while current accounts face higher standardized thresholds. The move aims to bring uniformity across banks, reduce hidden penalty charges, and improve transparency in how account maintenance fees are applied.

This change will particularly affect urban customers who face a steep increase, while rural thresholds remain modest. Special zero-balance accounts like Jan Dhan Yojana remain exempt.

Effective Date: January 15, 2026
Savings accounts now require different minimum balances depending on region.

Key Highlights

• Savings Accounts: ₹5,000 (Metro), ₹3,000 (Semi-urban), ₹1,000 (Rural)
• Current Accounts: Higher standardized thresholds
• Objective: Standardize norms, reduce hidden charges, ensure transparency

Comparison Table

Account Type	Old Rules (varied by bank)	New Rules (RBI standard, Jan 2026)
Savings – Metro	₹2,000–₹3,000	₹5,000
Savings – Semi-urban	₹1,000–₹2,000	₹3,000
Savings – Rural	₹500–₹1,000	₹1,000
Current Accounts	₹5,000–₹10,000	Higher, standardized by RBI

Implications for Account Holders

• Uniform penalties for falling below minimum balance
• Digital banking users must adjust to higher thresholds
• Rural customers face modest increases; metro customers see larger jumps
• Transparency in communication of charges

Actionable Steps

• Check your bank’s notifications for updated guidelines
• Adjust monthly budgets to maintain required balances
• Explore zero-balance accounts (Jan Dhan, special schemes remain exempt)
• Set SMS/email alerts for low balances

RBI Deputy Governor Unveils 3 Groundbreaking Digital Payment Innovations at Global Fintech Fest 2025

1. UPI Multi-Signatory
2. Small Value Transactions using Wearable Glasses via UPI Lite and
3. Forex on Bharat Connect

The Reserve Bank of India Deputy Governor Shri T. Rabi Sankar, announced the launch of three key digital payment innovations at the Global Fintech Fest 2025. The new offerings are ‘UPI Multi-Signatory’, ‘Small Value Transactions using Wearable Glasses via UPI Lite’ and ‘Forex on Bharat Connect’.

UPI Multi-Signatory 

The RBI Deputy Governor announced the launch of the Multi-Signatory Accounts feature on UPI to enables multi-signatory/ joint accounts on UPI that require authorisation from one or more signatories to perform UPI payments seamlessly. Signatories can conveniently use a any UPI app to manage linked bank accounts, making the process more convenient, hassle free and enhancing transaction speed. This feature is fully interoperable, allowing initiators to use any UPI or bank apps, while signatories can approve via any UPI or bank app. By eliminating the delays, it improves efficiency and creates complete transparency through digital records of approvals and payments.

This is the first time UPI is extending approval-based payment capabilities to joint/ multi-signatory account holders. Corporates, MSMEs, start-ups, trusts, and joint account holders can now use UPI for vendor payments, recurring payments, reimbursements, etc. that require authorisation from one or more users/ signatories.

Small Value Transactions Using Wearable Glasses via UPI Lite 

The RBI Deputy Governor also announced the launch of ‘Small Value Transactions using Wearable Glasses via UPI Lite’. UPI Lite is designed for small-value, high-frequency payments with enhanced success rates and minimal dependency on core banking infrastructure. With this integration, users can complete hands-free and secure transactions by simply scanning a QR, authenticate and complete payments through voice on Smart Glasses, without needing a phone or entering a PIN. The solution is aimed at everyday payments such as retail, food, and transit, encouraging greater digital payment penetration. This feature addresses customers’ growing demand for seamless, frictionless payments that integrate effortlessly into their always-connected, on-the-go digital lifestyle. This launch marks the first time UPI is extended to the wearable ecosystem, representing a step towards ‘ambient payments’ by enabling seamless digital payments. It also benefits banks and PSPs by reducing core banking system load through off-CBS wallet execution. Embedding UPI Lite on Smart Glasses enhances convenience for consumers and strengthens India’s leadership in digital payment innovation globally.

Forex on Bharat Connect

The event also featured the launch of linkage of FX Retail Platform with Bharat Connect, enabling retail customers to access foreign currency (USD) through their preferred payment/banking apps integrated with the Bharat Connect (BBPS) platform.

The product, launched by NPCI Bharat BillPay Ltd. (NBBL) in collaboration with the Clearing Corporation of India Limited (CCIL) and under the guidance of the Reserve Bank of India (RBI), ensures transparent pricing with real-time, competitive rates sourced from the CCIL-managed FX-Retail platform. Customers can seamlessly buy USD for three delivery modes – Currency notes, Forex Card Load or Outward Remittance and fulfill digitally on Bank’s platform or visit a Bank Branch post purchase of forex.

This integration allows individual customers of participating Authorised Dealer Category-I which are Axis Bank, Federal bank, ICICI Bank, State Bank of India and Yes Bank to register, view ‘Best Price’ in real time, and complete purchase of US Dollars digitally. It enhances convenience, security, and transparency for customers while addressing long-standing challenges such as physical documentation, inconsistent markup pricing, prolonged processing times, and long banking queues. The collaboration between NBBL, CCIL, banks and select apps is a step forward in expanding access to regulated forex services, promoting financial inclusion, and strengthening India’s digital payments ecosystem.

RBI To Pay Record-Breaking Dividend of ~ $35 Bn To Govt of India

The Reserve Bank of India (RBI) is expected to transfer a record-breaking dividend of up to ₹3 lakh crore ( approx. US $35 Billion) to the government for FY25, significantly surpassing last year's ₹2.11 lakh crore reported the Economic Times and other media outlets. This surge is attributed to robust earnings from dollar sales, rising gold prices, and gains from government securities.

The final amount will be determined in the RBI board meeting on May 23, following a review of the Economic Capital Framework (ECF).

This higher dividend could help manage the fiscal deficit and improve liquidity in the banking system. Economists suggest that the surplus transfer might range between ₹2.5 lakh crore to ₹3 lakh crore, depending on provisioning levels.

The reported 3 lakh crore in Dividends to the government for FY25, marks a nearly 50% increase from last year’s ₹2.11 lakh crore. This surge is driven by robust earnings from dollar sales, rising gold prices, and gains from government securities.

Key Factors Behind the Higher Dividend:

• Dollar Sales: The RBI sold $371.6 billion in FY25 to stabilize the rupee, significantly boosting its earnings.
• Gold Price Surge: Appreciation in gold prices contributed to valuation gains
• Government Securities: Market-to-market gains on RBI’s holdings of rupee securities added to the surplus.

Economic Capital Framework (ECF) Review: The RBI board met on May 15 to review the ECF, which determines risk provisioning and surplus distribution. The final dividend amount will be decided in the May 23 board meeting.

Impact on India’s Economy:

Fiscal Deficit Management: The surplus transfer will help the government reduce fiscal deficit and maintain liquidity in the banking system.

Bond Market Influence: A higher-than-expected dividend could impact bond yields, with markets already factoring in a ₹2.5 lakh crore payout.

Banking Liquidity: The dividend is expected to increase liquidity in the system, potentially reaching ₹6 lakh crore

Cred Becomes 1st Fintech Platform to Roll Out Access to CBDC e-Rupee

Cred, a fintech platform backed by Tiger Global and Peak XV, has become the first fintech company to roll out access to India's central bank digital currency (CBDC), known as the e-rupee.

The Reserve Bank of India (RBI) initiated a pilot for the e-rupee in December 2022, initially allowing only banks to offer access. However, in April 2024, the RBI expanded the pilot to include payment firms.

Cred will initially roll out access to its e-rupee wallet to a select set of users, with the issuance of e-rupee tokens facilitated by YES Bank. The goal is to make e-rupee transactions seamless and drive adoption among creditworthy users.

Kunal Shah, the founder of Cred, stated that their goal is to make e-rupee transactions frictionless and drive its adoption among the most creditworthy Indians.

While e-rupee transactions had surged initially, they have since declined, reflecting the global challenge central banks face in popularizing digital currencies.

Cred's platform is known for catering to creditworthy users, making it an ideal partner for the initial rollout of the e-rupee to ensure a smooth and reliable implementation.

Other payment firms like GooglePay, PhonePe, AmazonPay, and MobiKwik are also expected to join the digital currency pilot.

RBI to Test CBDC With Its Own Officials

The Reserve Bank of India (RBI) is planning to test its Central Bank Digital Currency (CBDC) by crediting a portion of allowances to the digital wallets of its officers reports Economic Times citing an internal communique to senior officials of the central bank.

The RBI internal communique dated December 27, said, “As a part of scaling up of CBDC retail pilot and to encourage the use of CBDC wallet by the officers of the bank (RBI), it has been decided to credit the reimbursement amount towards internet/data charges to the CBDC wallets of officers…”

A user manual for updating the CBDC wallets has been circulated. The testing phase involves various aspects such as security, transaction speed, and user experience to ensure a smooth rollout.

This move is part of a broader effort to explore the potential of CBDCs and understand how they can be integrated into the existing financial system.

The Reserve Bank of India (RBI) has been actively exploring the concept of a Central Bank Digital Currency (CBDC). Recently, there have been reports about RBI officials conducting tests to understand the potential impact and functionality of a CBDC in the Indian financial system.

These tests are part of a broader initiative to evaluate how a digital currency issued by the central bank could be integrated into the existing monetary framework. The RBI is considering various aspects, including the technological infrastructure, security measures, and the potential economic implications of introducing a CBDC.

RBI to Offer Cloud Storage Services to Financial Institutions

India's central bank, Reserve Bank of India (RBI), is planning to launch a cloud storage pilot program in 2025 aimed at providing affordable data storage solutions to financial institutions.

A key objective of this initiative is to promote local data sovereignty by reducing dependency on foreign cloud service providers. Thus, the initiative is designed to counter the dominance of global cloud service providers like Amazon Web Services (AWS), Microsoft Azure, Google Cloud, and IBM Cloud.

The platform will be developed in collaboration with local IT firms, promoting local data sovereignty and reducing dependency on foreign cloud services.

The primary goal is to offer cost-effective solutions, especially for smaller financial institutions that find existing cloud services unaffordable. The platform aims to provide affordable cloud storage solutions, especially for smaller financial institutions that find existing services unaffordable.

The project is being spearheaded by the RBI's research department, known as the Indian Financial Technology and Allied Services (IFTAS). The initial development will be done in collaboration with local IT firms.

In later stages, the RBI plans to invite financial firms to hold equity in the cloud service, ensuring broader participation and investment.

The pilot program will be expanded in phases over the next few years to cater to the needs of various financial institutions.

Consultancy firm Ernst & Young has been appointed as an advisor for the project.

Only Indian-registered companies with prior experience in cloud technology are invited to bid for the project. These companies must establish data centers in Mumbai and Hyderabad.

There has been a significant amount of interest from IT companies and Indian cloud service providers eager to partner on this project.

This move by the RBI is seen as a strategic step to enhance local data storage capabilities and support the financial services sector with reliable and affordable cloud solutions.

The cloud services market in India is expected to grow significantly, from $8.3 billion in 2023 to $24.2 billion by 2028. This initiative is expected to contribute to this growth by fostering local IT development.

Growing Use of AI & ML Can Risk Financial Stability, Says RBI Governor

Shaktikanta Das, the Governor of the Reserve Bank of India (RBI), recently warned about the potential financial stability risks associated with the growing use of artificial intelligence (AI) in financial services.

During the RBI@90 High-Level Conference in New Delhi, the RBI Chief highlighted several concerns. He conveyed that "Heavy reliance on Al" could lead to concentration risks, especially if a small number of technology providers dominate the market.

Failures or disruptions in Al systems could cascade across the financial sector, amplifying systemic risks. Increased use of Al could make financial systems more susceptible to cyberattacks and data breaches, Shaktikanta Das said in the RBI@90 High-Level Conference in New Delhi.

The "opacity" of Al makes it difficult to audit and explain the algorithms driving financial decisions, potentially leading to unpredictable market consequences, warned Das. 

Das urged banks to enhance their liquidity buffers and remain vigilant in the social media space to deal with any unforeseen situations. He also emphasized the need for adequate risk mitigation practices to address these emerging vulnerabilities.

It's a timely reminder of the importance of balancing innovation with risk management.

The RBI@90 High-Level Conference was held in New Delhi to mark the 90th anniversary of the Reserve Bank of India (RBI). The event featured a keynote address by RBI Governor Shaktikanta Das titled "Central Banking at Crossroads". During his speech, Governor Das discussed the evolving role of central banks amid global uncertainties and emphasized the importance of financial stability and economic growth.

The conference also included panel debates and discussions on various topics related to central banking, including the impact of emerging technologies like AI on financial systems.

Tata Sons Pays $2.39 Bn Debt to Dodge Mandatory Listing on Stock Exchange

Tata Sons, the $410-billion holding company of the Tata Group, voluntarily surrendered its certificate of registration to the Reserve Bank of India (RBI) after repaying over ₹20,000 crore (~ US $2.39 billion) in debt. By doing so, Tata Sons remains an unlisted entity and can continue operating as a closely held company without listing its shares on the stock exchange, as mandated by RBI regulations.

This strategic move allows Tata Sons to maintain its status while significantly reducing its liabilities.

Dodging the mandatory listing allows Tata Sons to remain unlisted and retain control over its operations. Listing requirements come with additional costs (such as compliance, reporting, and transparency) that the company can now avoid.

In September 2022, the RBI classified Tata Sons as a Non-Banking Financial Company – Upper Layer (NBFC-UL). According to RBI regulations, NBFC-ULs are required to list their shares on a stock exchange within three years of this classification.

The RBI’s revised regulations mandated that large non-banking finance companies (NBFCs) must list their shares on a stock exchange within three years. For Tata Sons, this meant they needed to be listed by September 202512.

By repaying the debt and surrendering its certificate of registration, Tata Sons could avoid the mandatory listing requirement and continue operating as a closely held company.

Tata Sons is the principal investment holding company and promoter of the Tata Group. The Tata Group is a vast conglomerate with numerous companies across various sectors. Here are some of the major companies within the Tata Group — Tata Consultancy Services (TCS), Tata Motors, Tata Steel, Tata Power, Titan Company, Tata Consumer Products, Tata Chemicals, Tata Communications, Indian Hotels Company Limited (Taj Hotels), Voltas, Trent (Operates retail chains like Westside), Tata Projects, Air India, and acquired-startups like BigBasket and 1mg.

These companies operate independently under the guidance and supervision of their own boards of directors.

RBI Tightens P2P Lending Rules As Several Lending Platforms Violating Norms

The Reserve Bank of India (RBI) has recently tightened regulations for peer-to-peer (P2P) lending platforms to enhance transparency and protect investors.

The Central Bank has reviewed and updated the Master Direction for Non-Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017.

According to the recent circular, RBI said some of the entities adopted certain practices which are in violation of its regulations. “Such practices include, among others, violation of the prescribed funds transfer mechanism, promoting peer-to-peer lending as an investment product with features like tenure-linked assured minimum returns, providing liquidity options and at times acting like deposit takers and lenders, instead of being a platform,” it said.

The original master direction on NBFC – P2P lending platform (Reserve Bank) Directions, 2017, laid out clear rules for the operation of P2P lending platforms which serve as intermediaries in facilitating online transactions between lenders and borrowers.

However, RBI said it observed deviations from these rules, including violations related to funds transfer mechanisms, promoting P2P lending as an investment product, and practices resembling deposit-taking. To address these concerns, RBI revised and clarified several provisions of the directions

Here are the key changes, RBI has made

1. Credit Risk Prohibition: P2P platforms are now prohibited from assuming any credit risks. 

2. No Credit Enhancements or Guarantees: These platforms cannot offer credit enhancements or provide guarantees.

3. Investment Cap: Individual lenders are restricted from investing more than ₹50 lakh cumulatively through P2P platforms.

4. Disclosure Requirements: Platforms must disclose any losses borne by lenders on principal or interest.

5. Prohibition on Cross-Selling: P2P platforms cannot cross-sell insurance products related to credit enhancement or guarantees.

These updates aim to create a safer and more transparent environment for both lenders and borrowers.

RBI Bars Kotak Mahindra Bank from Onboarding New Customers

The Reserve Bank of India (RBI) has taken regulatory action against Kotak Mahindra Bank. As of recent reports, the RBI has directed the bank to stop onboarding new customers through its online and mobile banking channels. Additionally, the bank has been instructed to cease issuing new credit cards with immediate effect.

This decision comes after the RBI found significant deficiencies in the bank's IT risk management during their examination. The issues identified include non-compliances in areas such as IT inventory management, patch and change management, user access management, vendor risk management, data security, and data leak prevention strategy, among others.

It's important to note that existing customers of Kotak Mahindra Bank, including credit card holders, will not face any service disruptions and can continue to use their services as usual. The bank is required to address these concerns in a comprehensive and timely manner to meet the regulatory standards set by the RBI.

The immediate halt on onboarding new customers through online and mobile banking channels will likely slow down the bank's customer growth, especially in the digital space where most new customers are acquired nowadays.

Such regulatory actions can affect the bank's reputation among stakeholders, including customers, investors, and partners. It may lead to a loss of trust and confidence in the bank's ability to manage risks, particularly IT and data security risks.

RBI Approves NPCI Bharat BillPay to Implement an Interoperable Payment System for Internet Banking Transactions

The Reserve Bank of India (RBI) has approved NPCI Bharat BillPay Ltd to implement an interoperable payment system for internet banking transactions. The new system will facilitate quicker settlement of funds for merchants.

Expected to be launched during the current calendar year, the new system will enable customers to pay businesses through net banking irrespective of whether their banks and the merchants’ payment aggregator are integrated.

Currently, online merchant payment transactions are processed through payment aggregators, which are not interoperable. So a bank is required to separately integrate with each payment aggregator of different online merchants.

India accounts for 46% of the world's digital transactions.

Speaking at an event "Digital Payment Awareness Week" in Mumbai, RBI Governor Shaktikanta Das said, "Internet Banking is one of the oldest modes for online merchant payment transactions. It is a preferred channel for payments like income tax, insurance premium, mutual fund payments and e-commerce."

Governor Das said that there is no common payment system and a set of rules for digital transactions at the moment. But when it comes to digital transactions, the world is looking at India, he said.

The proposed interoperable net banking payments will act as a clearing house to settle internet banking transactions between customers and merchants. This would eliminate the need for individual tie-ups.

RBI Ombudsman Partners Bajaj Finance & Bajaj Auto to Create Awareness on RBIOS, Fraud and Financial Literacy

The Office of the Reserve Bank of India Ombudsman Mumbai, in partnership with Bajaj Finance and Bajaj Auto Ltd, successfully organised an extensive awareness program on the Reserve Bank Integrated Ombudsman Scheme (RBIOS), Fraud Awareness, and Financial Literacy on October 19th and 20th, 2023 at the Bajaj Auto plant premises in Waluj (Aurangabad).

The program was graced by the presence of Mr. H S Verma, Deputy RBIO Mumbai II, Mr. Aniruddha Mallick, AGM RBIO Mumbai II, and Mr. Akash Kabra, AM RBIO Mumbai II, along with Mr. Rinku Anand, Principal Nodal Officer, and his dedicated team. In addition, numerous staff members from the State Bank of India (SBI) and approximately 300 enthusiastic participants actively participated in this learning initiative.

Mr. Verma emphasised the success of the RBIOS as an indispensable resource for the common man. He elucidated the simple and cost-free procedure for filing complaints under the scheme, which can be conveniently done online at cms.rbi.org.in

The RBI Integrated Ombudsman Scheme (RBIOS) serves as a free, swift, impartial, and efficient mechanism to address issues that banks or other regulated companies fail to resolve within 30 days of receiving a complaint. Mr. Verma urged participants to remain vigilant by monitoring their account activities through SMS and promptly reporting unauthorized transactions to their respective banks.

He also stressed upon the importance of safeguarding personal information, such as the CVV number on credit cards, to prevent potential losses if the card is lost or compromised. Mr. Verma warned against sharing sensitive data like bank account numbers, debit card details, identification (ID), Personal Identification Number (PIN), or One-Time Password (OTP) with anyone, particularly fraudsters who may request this information over the phone. Furthermore, he advised recipients of SMS or email notifications about lottery winnings or draws not to send any money.

Participants were also encouraged to lodge complaints related to digital wallets, prepaid payment instruments, mobile banking, and electronic banking, including cases of non-credit to merchants, refunds for failed/unsuccessful/unauthorized transactions, and more, through the RBIOS online portal.

Representatives from Bajaj Finance, including Mr. Rinku Anand, Mr. Ankur Arora, and Ms. Megha More, addressed the participants, sharing valuable insights and information. Mr. Mallick and Mr. Kabra urged all attendees to exercise caution when using online banking and ATMs, advising against sharing PINs or OTPs with anyone. They also highlighted that individuals can inquire about the status of their complaints or raise concerns by contacting the Reserve Bank Ombudsman on the toll-free number 14448.

The collaboration between the Reserve Bank of India Ombudsman Mumbai, Bajaj Finance, and Bajaj Auto Ltd underscores their commitment to enhancing public awareness, financial literacy, and fraud prevention. The event served as an important step in empowering individuals to protect their financial interests and seek prompt resolution to any issues they encounter within the banking and financial sector.

ABOUT BAJAJ FINANCE LIMITED

Bajaj Finance Ltd. (‘BFL’, ‘Bajaj Finance’, or ‘the Company’), a subsidiary of Bajaj Finserv Ltd., is a deposit-taking Non-Banking Financial Company (NBFC-D) registered with the Reserve Bank of India (RBI) and is classified as an NBFC-Investment and Credit Company (NBFC-ICC). BFL is engaged in the business of lending and acceptance of deposits. It has a diversified lending portfolio across retail, SMEs, and commercial customers with a significant presence in both urban and rural India. It accepts public and corporate deposits and offers a variety of financial services products to its customers.

BFL, a thirty-six-year-old enterprise, has now become a leading player in the NBFC sector in India and on a consolidated basis, it has a franchise of 72.98 million customers. BFL has the highest domestic credit rating of AAA/Stable for long-term borrowing, A1+ for short-term borrowing, and CRISIL AAA/Stable & [ICRA]AAA(Stable) for its FD program. It has a long-term issuer credit rating of BBB-/Stable a and a short-term rating of A-3 by S&P Global ratings. To know more, visit www.bajajfinserv.in/ 

NPCI Launches UPI LITE X, Tap & Pay and Conversational Payments

RBI Governor Launches Key Digital Payment Initiatives at Global Fintech Fest 2023

Launch includes Credit Line on UPI, UPI LITE X and Tap & Pay, and Conversational Payments

Reserve Bank of India (RBI) Governor, Shri Shaktikanta Das, today announced the launch of a suite of new product offerings built by the National Payments Corporation of India (NPCI). In keeping with the theme of the Global Fintech Fest 2023, the new products – Credit Line on UPI, UPI LITE X and Tap & Pay, Hello! UPI - Conversational Payments on UPI, BillPay Connect - Conversational Bill Payments, – are aimed at creating an inclusive, resilient, and sustainable digital payments ecosystem. The launch took place in the presence of Shri Nandan Nilekani, Non-Executive Chairman, Infosys and Advisor to NPCI, and Shri Biswamohan Mahapatra, Non-Executive Chairman, NPCI.

The launches aligned with the prior communique by the Reserve Bank of India in its recent monetary policy announcements.

Credit Line on UPI

To expand access to credit, promote financial inclusion and innovation, the RBI Governor launched Credit Line on UPI. This new offering enables pre-sanctioned credit lines from banks via UPI and will revolutionize customer access to credit, fostering a more streamlined and digital banking ecosystem. With this, the process of availing, connecting, and utilizing credit lines will be significantly expedited, driving economic growth and progress. The initiative encompasses several key features, including the linkage of pre-sanctioned credit lines, the creation of digital credit products by banks, the establishment of interest-free credit periods and corresponding interest rates, defined schedule of charges, customer engagement channels for credit sanction requests, and the ability to link various pre-sanctioned credit lines via UPI-enabled apps for transactions. To ensure seamless interoperability, all UPI apps, including bank and third-party apps, will be empowered to discover and link credit lines on UPI, as well as provide end-to-end customer lifecycle services.

UPI LITE X and Tap & Pay

Building on the success of UPI LITE feature, the RBI Governor launched UPI LITE X for Offline payments. Through this feature, users can now both send and receive money whilst being completely offline, therefore, allowing users to initiate and execute transactions even in areas with poor connectivity, such as underground stations, remote areas, etc. UPI LITE X will be accessible to anyone with a compatible device that supports Near Field Communication (NFC). UPI LITE payments are faster than other payment methods, as they require less time to process the transaction.

QR codes have seamlessly integrated into the UPI payments ecosystem, playing a crucial role in facilitating digital transactions. In a significant move towards enhancing QR code and Near Field Communication (NFC) technology adoption, the RBI Governor also introduced UPI Tap & Pay. In addition to the conventional Scan and Pay method, users now have the option to simply tap NFC- enabled QR codes at merchant locations to complete their payments.

Conversational Payments

The next in the line of announcements was Conversational UPI Payments and Conversational Bill Payments. Conversational Payments underscores the emergence of a novel paradigm for human- machine interaction facilitated by AI-enabled transactions which will further deepen the reach and use of digital payments in the country.

Hello! UPI – Conversational Payments on UPI:

The introduction of conversational UPI payments will augment user experience by enabling them to make voice-enabled UPI payments via UPI Apps, telecom calls, and IoT devices in Hindi and English, and will soon be available in several other regional languages. This expansion will broaden payment accessibility for most Indians who are fluent in their native languages, providing significant benefits to senior citizens and digitally inexperienced individuals. Users can simply give voice commands to transfer funds and input UPI PIN to complete the transaction. NPCI has partnered with the Bhashini program – AI4Bharat at IIT Madras, to co-develop Hindi and English payment language models.

BillPay Connect – Conversational Bill Payments:

With BillPay Connect, Bharat BillPay introduces a nationalized number for bill payments across India. Customers can now conveniently fetch and pay their bills by sending a simple ‘Hi’ on the messaging app. Along with this, customers without smartphones or immediate mobile data access will be able to pay bills by giving a missed call. Customers will receive an immediate call back for verification and payment authorization. Additionally, BillPay Connect offers Voice Assisted Bill Payments facility. Customers can fetch and pay bills through voice commands on their smart home devices and get instant voice confirmation. Moreover, instant voice confirmations will be enabled for bill payments made at physical collection centers through payment soundbox devices. This development aims to provide both customers and collection centers with added security and a sense of reassurance. 

About NPCI:

National Payments Corporation of India (NPCI) was incorporated in 2008 as an umbrella organization for operating retail payments and settlement systems in India. NPCI has created a robust payment and settlement infrastructure in the country. It has changed the way payments are made in India through a bouquet of retail payment products such as RuPay card, Immediate Payment Service (IMPS), Unified Payments Interface (UPI), Bharat Interface for Money (BHIM), BHIM Aadhaar, National Electronic Toll Collection (NETC) and Bharat BillPay.

NPCI is focused on bringing innovations in the retail payment systems through the use of technology and is relentlessly working to transform India into a digital economy. It is facilitating secure payment solutions with nationwide accessibility at minimal cost in furtherance of India’s aspiration to be a fully digital society.

RBI Selects McKinsey, Accenture To Develop AI and ML based System for Supervision on Banks, NBFCs

Reserve Bank of India (RBI) wants to extensively use advanced analytics, Artifical Intelligence (AI) and Machine Learning (ML) to analyze its huge database and improve regulatory supervision on banks and non-banking financial companies (NBFCs). For this, the India's central bank is planning has given contract to external experts.

RBI has selected global consultancy firms McKinsey and Company India LLP and Accenture Solutions Pvt Ltd India to develop systems using AI and ML for its supervisory functions.

It was in last September, when the RBI invited expressions of interest (EoI) to involve consultants in using advanced analytics Artificial Intelligence and Machine Learning for generating supervisory inputs.

Based on the screening/evaluation prescribed in the EoI document, the Central Bank shortlisted 7 applicants for selection of Consultants. The shortlisted 7 firh ms included Accenture Solutions Private Limited; Boston Consulting Group (India) Pvt Ltd; Deloitte Touche Tohmatsu India LLP; Ernst and Young LLP; KPMG Assurance and Consulting Service LLP; McKinsey and Company; and Pricewaterhouse Coopers Pvt Ltd.

Eventually, Indian Units of McKinsey and Accenture were the ones who got awarded a contract worth rupees 91 crore, according to the Reserve Bank document.

The Department of Supervision has been developing and using linear and a few machine-learnt models for supervisory examinations. The interest now is to explore the data to identify its attributes that can be leveraged to generate new and improved supervisory inputs, said the EoI issued in September.

This supervisory jurisdiction of RBI ranges from various banks like urban cooperative banks, NBFCs, payment banks, small finance banks, and local area banks to credit information companies and all Indian financial institutions.

RBI Proposes Conversational AI & NFC based Payments in UPI, and Transaction Limit Enhancement

India's digital payments ecosystem has been transformed drastically in last 3-4 years by NPCI-developed UPI, which brought ease of usage, safety and security along with real-time feature for users across India. Addition of many new features over time have enabled UPI to facilitate diverse payment needs of the Indian economy such as UPI-lite, which was launched in September last year.

Now, in a latest India's central bank, RBI (Reserve Bank of India) feels the need to utilize Artificial Intelligence (AI) in UPI, as the AI technology is being increasingly integrated into the digital economy. The Central Bank has proposed enabling 'Conversational AI' based Payments on UPI, which will enable users to engage in conversation with AI-powered systems to make payments.

This conversational AI based Payments, according to the RBI, holds immense potential in enhancing ease of use, and consequently reach, of the UPI system.

RBI, thus, proposed to launch an innovative payment mode viz., “Conversational Payments” on UPI, that will enable users to engage in a conversation with an AI-powered system to initiate and complete transactions in a safe and secure environment. This channel will be made available in both smartphones and feature phones-based UPI channels, thereby helping in the deepening of digital penetration in the country. The facility will, initially, be available in Hindi and English and will subsequently be made available in more Indian languages.

Speaking on introduction of 'Conversational payments' in UPI, Akash Sinha, CEO & Co-Founder, Cashfree Payments, said, "The Reserve Bank of India (RBI) has once again emphasised the significance of promoting digital payments in its latest Monetary Policy announcement. By proposing innovative concepts such as Conversational Payments and Offline capability on the Unified Payments Interface (UPI), the Central Bank is wholeheartedly advocating the integration of cutting-edge technologies like Artificial Intelligence (AI) and Near Field Communication (NFC) through 'UPI-Lite' on-device wallet, within the realm of payments.

"In a broader context, the Central Bank's concerted efforts to enhance the adoption and effectiveness of digital payments are fostering a robust and competitive environment for all stakeholders involved. Moreover, the ingenuity and progress achieved in India's digital payments landscape are poised to strengthen our global standing, particularly concerning UPI and digital payments. This collective advancement is set to elevate India's stature on the global stage, underscoring our nation's prowess and leadership in the realm of innovative payment solutions”, Sinha added.

Offline Payments in UPI using Near Field Communication (NFC) Technology

The RBI has also proposed to facilitate offline transaction using Near Field Communication (NFC) technology. This feature will not only enable retail digital payments in situations where internet / telecom connectivity is weak or not available, but will also ensure speed, with minimal transaction declines.

NFC (Near field communication) is a method of wireless data transfer that detects and then enables technology in close proximity to communicate without the need for an internet connection. NFC is what makes tap-and-go services like Apple Pay, Android Pay and Amiibo work. 

Enhancing transactions limits for small value digital payments

Moreover, the RBI has also prescribed a limit of ₹200 per transaction and an overall limit of ₹2000 per payment Instrument for small value digital payments in offline mode including for National Common Mobility Card (NCMC) and UPI Lite. By removing the need for two-factor authentication for small value transactions, these channels enable faster, reliable, and contactless mode of payments for everyday small value payments, transit payments etc.

RBI said that there have been demands for enhancing these limits. To encourage wider adoption of this mode of payments and bring in more use cases into this mode, it is now proposed to increase the per transaction limit to ₹500. The overall limit is, however, retained at ₹2000 to contain the risks associated with relaxation of two-factor authentication. Instructions in this regard will be issued shortly.

For implementation of all these new features, "Instructions to NPCI will be issued shortly", said RBI in a release.

NPCI (National Payments Corporation of India) is an umbrella organization under an initiative of the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA), under the provisions of the Payment and Settlement Systems Act, 2007, for creating a robust Payment & Settlement Infrastructure in India. NPCI developed the entire UPI system and launched it in 2016 for public use.

New Fair Lending Disclosure Guidelines to Enhance Trust Among Stakeholders: Fintech Convergence Council

The Fintech Convergence Council (FCC) welcomes the recent announcement by the Reserve Bank of India (RBI) introducing the Fair Lending Disclosure Guidelines (FLDG). These guidelines mark a pivotal moment in the evolution of the digital lending landscape, and the FCC acknowledges the positive impact they will have on the industry.

The FLDG are set to accelerate digital lending by fintech companies and anticipate a significant surge in funding for digital lending fintech. The digital lending segment witnessed remarkable investment inflows in 2022, and the FLDG will undoubtedly fuel its continued growth.

The FCC recognizes the importance of establishing proper frameworks within the banking sector to ensure compliance with the FLDG. These guidelines will empower banks to implement efficient processes that adhere to the regulatory framework while enabling them to scale their partner-led digital lending initiatives effectively.

Mr. Navin Surya, Chairman, Fintech Convergence Council, said, "The RBI's circular on Default Loss Guarantee arrangements in digital lending reflects their commitment to fostering innovation while ensuring responsible risk management. By conducting extensive consultations and issuing detailed guidelines separately, the RBI establishes a transparent and comprehensive regulatory framework, promoting trust and confidence in the digital lending ecosystem. This move will not only boost credit penetration but also encourage collaboration between fintech and regulated entities for the benefit of the economy."

One key aspect of the FLDG is the emphasis on increased transparency within the lending ecosystem. Lending service providers (LSPs) will now be required to disclose all their relationships and portfolios, including any defaults, to relevant entities (REs). This heightened transparency will foster greater trust among stakeholders and enhance accountability within the industry.

While the guidelines may expose LSP-RE agreements to scrutiny by competitors, the FCC believes that this will encourage healthy competition and drive further improvements in the lending sector. The guidelines offer an opportunity for fintech companies to showcase their capabilities and maintain high standards while ensuring fair lending practices.

The FCC commends the Reserve Bank of India for its proactive approach to implementing the FLDG, which will undoubtedly shape the future of digital lending in India. These guidelines will empower stakeholders to embrace innovation, strengthen partnerships, and foster a transparent and resilient lending ecosystem.

About Fintech Convergence Council

The Fintech Convergence Council (FCC) was formed in 2018 to represent the positions of various regulated financial service providers and fintech companies regarding different issues. The FCC today represents over 100 members coming from different domains of the industry such as digital lending, wealth management, insurance, digital financial service providers, Regtech, Agritech and Bureaus.

The FCC has been at the forefront of public policy advocacy for the above-mentioned domains including the curation of thought leadership content. The council focuses on resolving various sector-specific challenges before the industry and aims at being a platform for all the stakeholders in the financial services (BFSI) ecosystem with an agenda to deliberate pertinent issues, integrate multiple voices and ensure the development of the fintech sector.

Website- https://www.fintechcouncil.in/about-fcc.php

Paytm Payments Services Ltd to Resubmit Application for Authorization to provide Payment Aggregator Services

RBI’s directives have no impact on Paytm’s business and revenue

Services continues for existing online merchants, hopeful to receive the necessary approvals in timely manner

India’s leading digital payments and financial services company Paytm today shared an update with the exchanges about its 100% subsidiary, Paytm Payments Services Limited (“PPSL”). The company said that it has received a letter from RBI in response to an application from PPSL for the authorization to provide payment aggregator services (“PA application”) for online merchants.

The company can now resubmit the application within 120 calendar days for the payment aggregator services. Ahead of that, the company will seek necessary approval for past downward investment from OCL into PPSL, to comply with FDI Guidelines.

During this process, the company will not onboard new online merchants. “We can continue to onboard new offline merchants and offer them payment services including All-in-One QR, Soundbox, Card Machines, etc. Similarly, PPSL can continue to do business with existing online merchants, for whom the services will remain unaffected,” said the company in its exchange filing.

This means that Paytm’s strong business momentum will continue, with no impact on its profitability target as the company can continue to work with its existing online merchants. Additionally, Paytm’s growing device deployments base and increasing offline payments base will also not be impacted with this development, where it can continue to onboard new merchants.

The company specifically outlined that this has no material impact on its business and revenues, since the communication from RBI is applicable only to onboarding of new online merchants.

“We are hopeful of receiving the necessary approvals in a timely manner and resubmitting the application,” said the company.

RBI Commences 1st Pilot of Digital Rupee e₹

The Reserve Bank of India (RBI) today launches the digital rupee – e₹ – for the wholesale segment as part of its first pilot test programme to review and improve the currency’s functionality.

"The first pilot in the Digital Rupee - Wholesale segment (e₹-W) shall commence on November 1, 2022", said the press release by the RBI.

This first pilot in Digital Rupee - Retail segment (e₹-W) is in select locations in closed user groups comprising customers and merchants. The details regarding operationalisation of e₹-W pilot shall be communicated by the RBI in due course.

Nine banks — State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC have been identified for participation in the pilot.

The use case for this pilot is settlement of secondary market transactions in government securities.

Use of e₹-W is expected to make the inter-bank market more efficient. Settlement in central bank money would reduce transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk. Going forward, other wholesale transactions, and cross-border payments will be the focus of future pilots, based on the learnings from this pilot.

In early last month, RBI issued a concept note on central bank digital currency (CBDC), listing the risks and benefits of introducing these currencies.

CBDC is legal tender issued in digital form. It is the same as fiat currency and is exchangeable one-to-one with government-issued money.

Government Should Monitor Tokenization Success and Take Proactive Measures

The year 2019 opened a pandora’s box giving the world numerous problems to deal with, be it the pandemic covid-19, subsequent on and off lockdowns 2020 onwards, or even resultant business shutdowns. While businesses suffered a lot in lockdowns, it also paved the way to digital mode of payments and it was in 2019 that India's central bank, RBI, started an attempt to secure the Digital Payments.

With the increase in usage of digital payments, Reserve Bank of India (RBI) allowed card networks to tokenize debit and credit card in order to continue improving the security and safety of card transactions.

What is Tokenization

Tokenization refers to a process by which a piece of sensitive data, such as 16-digit credit/debit card number, is replaced by a surrogate value referred as a 'Token', that has no intrinsic or exploitable meaning or value.

As per RBI guidelines, payment aggregators, wallets and online merchants (entities in card transaction/payment chain other than card issuers/card networks) cannot store any sensitive card-related customer information including full card details from October 1.

As per RBI, "Actual card data, token and other relevant details are stored in a secure mode by the authorised card networks. Token requestor cannot store Primary Account Number (PAN), i.e., card number, or any other card detail. Card networks are also mandated to get the token requestor certified for safety and security that conform to international best practices / globally accepted standards."

It is to be noted that tokenization is not mandatory for customers. A customer can choose whether or not to let his / her card tokenized. However, RBI encourages cardholders to tokenise their cards for their own safety. 

Besides being more secure, Tokenisation also speed up online payment processing as the customers do not have to enter every time they use it. In addition, in the absence of a card, the token helps the customer complete their transaction, making the process even simpler than before.

Has Tokenization been a success?

While tokenization brings breather for customers it also brought certain issues for merchants/online companies that runs on subscription-based business models such as Netflix, Microsoft, Spotify and Disney, which requires recurring deposits.

In mid of last month, the Merchant Payments Alliance of India (MPAI), an association that represents merchants, requested the RBI to plug issues around recurring payments through tokens before giving effect to the no-card storage rule.

As per media reports, MPAI said that success rates with tokens in testing mode for regular transactions have increased to 70–75 percent as opposed to the previous 65–70 percent. However, this is still lower than the 85-90 percent success rates of transactions executed with card details.

With this introduction of tokenization, while big merchants are not in much distress, smaller merchants are concerned as this would result losses in their revenue they were earning earlier.

The entire industry needs to be prepared

Though the RBI's intent is to ensure consumers' cards data security, there are lack of clarity on operational issues specifically for smaller merchants, since the very beginning when it was made mandatory. The deadline of mandate was extended thrice in last 18 months that created anxiety among smaller merchants and lack of preparedness due to the very fact that all the time durations between the deadlines were short for a massive country like India.

For an era of tokenization to occur a complete overhaul of existing system is what needed it is because all stakeholders in the transaction chain (issuers, acquirer banks, etc.) need to introduce technological infrastructure for meeting the requirements of proposed tokenisation.

Hastiness by RBI and small merchants' unreadiness for implementing tokenisation related infrastructures are two key deadlocks that resulted into chaos and now it's time for government to step in ensure smooth transition of digital payments into TOKENIZED Avataar.