Digital technology infrastructure will be India's growth engine of tomorrow. The focus is on next-generation communication technologies like 6G and satellite networks, along with expanding the 5G network to rural and hitherto uncovered urban areas, stated the Reserve Bank of India's report on currency and finance.
Graduating to advanced technologies will unleash opportunities in the last mile, it said. Attaining self-sufficiency in chip manufacturing is another key step in ensuring the realisation of the full potential of the digital revolution, the central bank explained. As the semiconductor and chip manufacturing ecosystem matures in India, it will create strong backward and forward linkages in the digital world through a rise in cloud services and data storage, including data centres, it said.
Converting to renewable energy sources will be critical while embracing these changes, as they involve energy consumption owing to voluminous data generation and data storage requirements. Demographic shifts impacting the demand and operations of financial services will also need to be taken care of while making policies.
Fintech Regulation Key
While digitisation in finance can contribute significantly to the spread and pace of financial deepening, such innovations cannot be allowed to disrupt the financial system.
Financial stability can be safeguarded if the relationship between banks and fintechs is appropriately balanced, the report said. Not aligning the regulation of non-bank fintechs to that of banks offering similar services may, however, create inefficiencies, amplify the risks of regulatory arbitrage, and create an uneven playing field. Notwithstanding these challenges, the imperative to regulate fintechs remains.
As such, the Reserve Bank's regulation is premised on three principles— encouragement of innovation, assimilation of innovation in the financial system in a nondisruptive manner and customer protection. The approach to regulation needs to be balanced, nuanced and reasonably anticipatory, with an oversight framework.
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