7 Key Digital Payments Related Innovations Introduced By RBI In 2024

The Reserve Bank of India announced many significant technology led changes to India’s digital payments system in 2024. The RBI aims to improve the functioning of the payment and settlement system infrastructure through these changes and innovative payment products. 

Here’s a look at some of the key payments and settlement related innovations the RBI introduced in 2024:

Increasing Adoption of UPI and RuPay Outside India

The RBI has undertaken several measures to increase the adoption of Indian payment instruments outside India. This has been achieved through initiatives aimed at interlinking the Unified Payments Interface with the fast payment systems of other countries and promoting the acceptance of RuPay cards globally. Earlier in June, the Reserve Bank joined Project Nexus which is aimed at enabling instant cross-border retail payments by interlinking the fast payment systems of Malaysia, Philippines, Singapore, Thailand and India. The RBI said in its Trend and Progress of Banking In India report for 2023-24 that the interlinking has been operationalised in Singapore, UAE, Nepal, Mauritius, Bhutan, France, Sri Lanka and the Maldives. Currently the interlinking process is underway for Peru and Namibia.

Expanding Scope of Bharat Bill Payment System (BBPS)

Bharat Bill Payment System (BBPS) is an RBI conceptualised bill payment system which works as a one-stop ecosystem for payment of all bills. Earlier in February the RBI issued a revised regulatory framework for the BBPS which was aimed at expanding the participation criteria to all authorised non-bank payment aggregators. The framework also included changes which were aimed at enhancing interoperability and providing increased customer protection measures.

Additional Authentication For Digital Transactions

Earlier in July the Reserve Bank of India released a draft framework on alternative/additonal authentication mechanisms for digital payment transactions. The framework mandated that all digital payment transactions need to be authenticated with additional factor (s) of authentication (AFA) wherein one of the factors of authentication should be dynamically created .

A dynamic factor of authentication means that the password or pin number required to conduct the transaction will be time sensitive and will be only initiated during the transaction. The guidelines were aimed to make digital transactions more secure and curb cases of One Time Password (OTP) based cyber fraud.

Pre-sanctioned Credit Lines through UPI

In September 2023 the Reserve Bank enabled pre-sanctioned credit lines to be linked through UPI. These pre-sanctioned lines can be used as a funding account by all Scheduled Commercial Banks (SCBs) apart from Payments Banks and Regional Rural Banks. On December 6, 2024. The move was aimed at increasing financial inclusion and the penetration of

formal credit for ‘new to credit’ customers.

Payments Vision 2025

The RBI’s Payments Vision 2025 initiative aims to bring all significant payment intermediaries under direct regulation of the Reserve Bank. As a part of the initiative the RBI plans to extend the guidelines for the regulation of online Payment Aggregators to Payment Aggregators (Point of Sale) as well. The initiative is aimed at enhancing synergy in regulation and convergence of standards.

Beneficiary Name Look-up Facility

The Unified Payments Interface and the Immediate Payment Service (IMPS) provide users the option to check the name of the beneficiary while conducting digital transactions. The RBI has enabled this feature for Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) transactions as well. The move is aimed at reducing the possibility of crediting money to the wrong person and curbing cyber frauds based on identity misrepresentation.

Cheque Truncation System (CTS)

The RBI said in its Trend and Progress of Banking In India report for 2023-24 that the current batch processing approach for cheque processing results in a clearing cycle of up to two working days. The Reserve Bank said that a proposal to transition to the Cheque Truncation System (CTS ) ‘on realisation settlement’ is being considered. As a part of the new approach cheques will be scanned, presented, and passed on a continuous basis during business hours reducing the total hours required for settlement. The transition is aimed at enhancing the efficiency of the process and reducing settlement risk for participants.