Reserve Bank Deputy Governor M Rajeshwar Rao said technological innovation in banking was very important but could not be followed by calling for customer privacy and non-responsive data protection. “We have to convince consumers that their data is safe and secure in all their financial relationships with regulated organizations and that – design and control must go hand in hand,” he said in a webinar at Open Banking by Tata Consultancy Services (TCS) in partnership with the Embassy of India in Brazil April 14. The RBI posted this statement on Friday.
Open banking refers to the sharing and use of bank-approved data by third-party developers and firms to build programs and services, including for example those that offer real-time payments, great financial transparency options for account holders, marketing and cross-selling opportunities. All stakeholders, Rao added, “should be aware of the fact that while technology is of paramount importance, customer privacy and data protection have not been discussed.”
He emphasized that “we must create trust” among our customers that their information is secure and secure in all their financial relationships with regulated entities and that – design and management must go hand in hand. The RBI’s Deputy Governor noted that in contrast to the proven international banking systems, India has adopted a path in which both regulators and the market are working together to develop an open banking environment.
In India, the RBI and NPCI came out with a payment system similar to the UPI and issued Application Programming Interfaces (APIs) to banks and third-party application providers based on them. Market participants, Rao said they are also innovating and many banks are releasing their APIs and partnering with fintech companies to provide better information to their customers. In addition, with the launch of Regulatory Sandbox and the Reserve Bank Innovation Hub, the RBI approach has become a way of promoting and directing, he said.
India has embarked on its approach to opening banks by empowering a consultant to oversee customer licensing management. These mediators are licensed as non-banking companies. In September 2016, the RBI announced the creation of a new licensed business called Account Aggregator (AA) and allowed them to compile customer financial information held by various financial institutions, spread out to financial company regulators.