RBI has firm faith in innovation, says Raghuram Rajan

Raghuram Rajan, governor of India’s central banking authority Reserve Bank of India (RBI), has said that RBI is betting on payment banks so that innovation can find a place in India’s banking systems. He added that RBI is open to new technology and instead of dismissing new systems, would like to wait for regulations to evolve.

"The easiest thing to say is 'No'. When there is uncertainty then it is easy to say No. But saying no prevents the system from developing. What should be the preferred thing to say is that wait, we should watch it and see how better the regulation can evolve," Rajan said. He was in Mumbai to launch a new payment system called the Unified Payments Interface (UPI), which allows people to send and receive money across banks without sharing any financial information like account details or card numbers.

While recounting how RBI has, in the past, pushed for innovation, Rajan listed the launch of payment banks, interest rate futures and a new liquidity framework for banks.

"We are taking a bet on payment banks. PayTm is an innovative firm and innovative firms are not always comfortable with the regulators. But we want to see where they push the system and so they have a payments bank licence. We are looking at these telecom companies and these startups and figure out as we go. Then we would know what more structure that we have to put on the system," Rajan said.

"For a number of years we have been saying that a banking revolution is needed. The revolution is upon us today," he said.

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