As India’s digital payments soar to record highs, the Reserve Bank of India is recalibrating its strategy — expanding digital public infrastructure, experimenting with a digital rupee, and seeking tighter fintech-bank partnerships to contain fraud and preserve stability.
Expanding Digital Infrastructure Amid Rising Frauds
The Reserve Bank of India (RBI) is intensifying its focus on digital public infrastructure (DPI) as a bulwark against financial fraud, according to Deputy Governor T. Rabi Sankar. Speaking at the State Bank of India Banking and Economics Conclave, Sankar noted that while fraud per transaction had been declining earlier this year, it began rising again from July, likely due to cyclical factors.
He said the RBI is looking to extend DPI beyond payments, toward credit and cross-border transactions, through initiatives like the Unified Lending Interface (ULI).
“One of the reasons why there is so much effort to develop public infrastructures is to reduce the incidents of fraud. We have to do everything to ensure that transactions do not fail,” Sankar said.
Despite the success of the existing framework — over 90% of digital transactions in India are processed seamlessly — Sankar cautioned that some level of fraud is inevitable in any system.
“It’s important to realise that there will be some degree of fraud in any system,” he said, adding that with the digital architecture being refined, the central bank hopes to “contain” the rise in fraud.
From UPI to ULI: Building the Next Layer of Trust
Reflecting on the trajectory of India’s digital transformation, Sankar acknowledged that traditional banks initially underestimated the potential of the Unified Payments Interface (UPI) — a system that revolutionized digital payments by removing friction between banks, consumers, and fintech firms.
“It was a disadvantage that banks have to bear the cost of regulation, both financially and in terms of the obligation to follow prudential processes,” he said. Fintechs, he noted, were quicker to recognize the advantages of UPI’s open architecture.
Sankar urged banks to learn from that experience and treat fintechs as partners, not competitors, in innovation. “We must build mutually beneficial and symbiotic strategic partnerships with the ecosystem,” he said, hinting at a future where collaboration between regulated banks and agile startups becomes central to India’s financial stability.
The Digital Rupee: A Cautious Experiment
The deputy governor also confirmed that the RBI is moving cautiously with the Central Bank Digital Currency (CBDC), keeping it in its pilot stage for now. The digital rupee, he explained, is designed as a digital form of cash issued by the central bank — but one that could transform settlement systems and lower the cost of transactions, especially across borders.
Explaining how the CBDC could help reduce remittance costs, Sankar said it could “reduce the settlement capital that banks must provide and streamline the process, thereby lowering related charges.” With over half of remittance costs attributed to exchange margins, the RBI is testing CBDC-based settlements with selected banks to evaluate whether those costs can be trimmed further.
“We have no doubt that CBDC will virtually change the way many of these payment transactions happen,” he said. “But we cannot take the risk of affecting the stability of the system. Therefore, we have to go slow.”
Cross-Border Ambitions and the Road Ahead
The RBI’s longer-term vision extends beyond domestic efficiency. By integrating DPI into cross-border frameworks, India aims to bring down remittance costs and enhance transparency in international settlements — areas where traditional systems remain slow and expensive.
Sankar said the RBI’s ongoing experiments are part of a broader strategy to ensure India’s financial ecosystem remains both inclusive and resilient.
“With the digital infrastructure that we are creating, and the success that we are seeing — more than 90% at this stage — we will be able to contain fraud,” he said.
Even as India’s fintech sector surges, the RBI’s message remains clear: technological progress must be matched by prudence. The digital rails of the future, it seems, will be built as much on caution as on innovation.
