Page 11 - Banking Finance April 2021

RBI CORNER

cards issued to basic savings bank Above this base layer will sit a middle RBI launches digital
deposit (BSBD) account holders. layer (NBFC-ML), where regulations payments index
On the other hand, during the same will be stricter than now. On top of Amid digital transactions' continuous
period, the number of credit cards that, in the upper layer (NBFC-UL), 25- rise across the country, the Reserve
issued also increased from 18 million to 30 NBFCs can be accommodated.
Bank of India has come up with a
57.7 million. The increase in cards has They will have bank-like regulations as 'composite Digital Payments Index
facilitated growth in both online and they have swelled in their sizes and (DPI)' to measure the extent of
physical point-of-sale (PoS) terminal- become the largest set of borrowers digitisation of payments in India.
based card payments, resulting in an from the financial system with deep Announcing the development recently,
increase in digital transactions. the central bank said that the RBI-DPI
interconnectedness, which can
"The drive for a less-cash economy in threaten financial stability. The layer consists of five key parameters that
the wake of demonetisation in 2016 will be populated by NBFCs that have would capture "deepening and
and the issue of RuPay cards for BSBD large potential for a systemic spillover penetration of digital payments in the
accounts has increased user of risks and have the ability to impact country over different time periods,"
acceptance in the interiors of the financial stability. RBI said in a statement.
country where paying with a card was The digital payments ecosystem is
"There is no parallel for this layer at
a novelty five years back. RuPay has its currently dominated by large technology
present, as this will be a new layer for players including Paytm, PhonePe,
popular debit card and its increasingly
regulation. The regulatory framework Google Pay, and recently launched
accepted credit version as well," the
RBI said. for NBFCs falling in this layer will be WhatsApp Payments. India's UPI
bank-like, albeit with suitable and payments had shot up 82 per cent in the
RBI for 'bank-like' regula- appropriate modifications," the current fiscal year's Q2 along with a 99
discussion paper said. per cent jump in value from the year-ago
tions for big shadow period, according to the Worldline India
At the very top, there will be a few Digital Payments report.
lenders NBFCs that will be subjected to the
The five parameters based on which
The Reserve Bank of India proposed to regulations proposed specifically for RBI would measure the penetration of
introduce a scale-based regulatory them. The top layer will essentially be digital payments included payment
framework for non-banking financial those NBFCs in the upper layer that can enablers, payment infrastructure -
companies (NBFC) to segregate larger pose extreme risks. Thus, they must be demand-side factors, payment
entities and expose them to a stricter put to significantly higher and bespoke infrastructure - supply-side factors,
set of "bank-like" rules. This is aimed regulatory/supervisory requirements. payment performance, and consumer
at protecting financial stability while
The base layer will comprise non- centricity. Each of these parameters
ensuring that smaller NBFCs continue also consisted of sub-parameters
to enjoy light-touch regulations and deposit taking NBFCs, while the middle which, in turn, included various
grow with ease. layer will be populated by non-deposit measurable indicators.
taking but systemically important
In a discussion paper released on its The RBI-DPI index was set-up with
website, the central bank suggested a NBFCs, deposit taking NBFCs, housing March 2018 as the base period with
finance companies, and others. The
four-tier pyramid structure for the the score set at 100. "The DPI for
sector. There will be a base layer regulatory regime for this layer shall be March 2019 and March 2020 work out
(NBFC-BL), which will have NBFCs with stricter compared to the base layer, to 153.47 and 207.84 respectively,
an asset size of up to Rs. 1,000 crore, and adverse regulatory arbitrage vis- indicating appreciable growth. Going
accommodating more than 95 per à-vis banks can be addressed for NBFCs forward, RBI-DPI shall be published on
cent of the non-deposit taking shadow falling in this layer in order to reduce RBI's website on a semi-annual basis
lenders. This layer will continue to systemic risk spillovers, where from March 2021 onwards with a lag
enjoy regulatory arbitrage. required, the paper said. of 4 months," RBI said. T

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