By Swati Bhat
MUMBAI (Reuters) - The Reserve Bank of India will explore options to ring-fence domestic payment systems including the need to mandate domestic processing of payment transactions, it said in its Payments Vision 2025 document released on Friday.
"Presently guidelines are in place for domestic storage of payments data. Banks and non-bank payment system operators are allowed to process payment transactions abroad subject to certain conditions," the RBI said.
"Keeping in view the emerging geo-political risks, options shall be explored to ring-fence domestic payment systems."
It did not specify what risks it was referring to but recently India has been struggling to settle trade with Russia due to Western sanctions on Moscow over its invasion of Ukraine.
With the innovations in payment processing and fund transfers, there has been a significant rise in the number of intermediaries that facilitate payments between payers and recipients, RBI said.
"Uniformity in implementation of user onboarding processes and transparency in operations of such intermediaries is found wanting," it added.
RBI will thus consider the need to bring all payment intermediaries including offline payment aggregators under its direct regulation.
The report said total digital payments have increased by 216% and 10% in terms of volume and value, respectively, for the month of March 2022 when compared to March 2019.
RBI said all digital payment providers bear a cost for providing these services which are either borne by the merchant or customers but these should be reasonable and must not deter the adoption of digital payments.
"A comprehensive review of all aspects related to charges involved in various channels of digital payments shall be undertaken".
The government said in January 2020 that merchant discount rate or MDR charges will not be applicable for transactions via unified payments interface and the country's indigenous card network, RuPay. Industry players believe MDR charges disincentivise investments in the payment infrastructure and RBI's schedule of charges is eagerly awaited.
RBI expects the various initiatives proposed in its vision statement to triple digital payment transactions among other things and also sees cash in circulation as a percentage of GDP falling.
(Reporting by Swati Bhat; editing by Philippa Fletcher)