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Retail payment products of HDFC Bank, Precision Biometric chosen for Test Phase under RBI’s Regulatory Sandbox

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Retail payment products of HDFC Bank

On September 5, 2022, the Reserve Bank of India (RBI) selected HDFC Bank (in partnership with Sweden-based Crunchfish Aktiebolag) and Precision Biometric India Pvt. Ltd for the Test Phase of the ‘On Tap’ application facility for the theme ‘Retail Payments’ (1st Cohort) under RBI’s Regulatory Sandbox (RS).

  • HDFC Bank is selected for its ‘Offline Retail Payments’, while Precision Biometric India Pvt chosen for its ‘InnaIT Key Solution for Banking’.
  • The opening of the ‘On Tap’ application facility for theme ‘Retail Payments’ was announced by RBI in October 2021.

Products Description:

i.Offline Retail Payments: It enables customers to pay and receive payments in offline mode. It aims to boost adoption of digital payments in areas of no or low network by enabling transactions without the need to have a network connection.

ii.InnaIT Key Solution for Banking: It offers a solution enabling biometric tokens which can be used for secure password less authentication and Additional Factor Authentication (AFA), instead of an OTP (One Time Password), for logging into internet/ mobile banking. The solution combines Public key infrastructure (PKI) and Biometric to enhance security and user experience in digital payments space.

RBI also announced the 5th Cohort under RS which will be themed ‘neutral’:

The central bank said the Fifth Cohort under Regulatory Sandbox will be theme neutral.
“Innovative products/services/technologies cutting across various functions in RBI’s regulatory domain would be eligible to apply. The application window for the same shall be communicated in due course,”.

About RBI Regulatory Sandbox:

i.RBI introduced a Regulatory Sandbox (RS) in 2019 to foster responsible innovation in financial services, promote efficiency and expand benefits to consumers. It refers to live testing of new products and services conducted in a controlled environment.

  • RS allows regulators, innovators, financial services providers and customers to conduct field tests to collect evidence on the benefits and risks of new financial innovations while carefully monitoring and containing risk.

ii.The Previous 4 Cohorts under RS are

  • First- Retail Payments
  • Second- Cross Border Payments
  • Third- MSME lending
  • Fourth- Prevention and Mitigation of Financial Frauds

iii.On Tap facility: Based on the experience gained from the 1st  and 2nd Cohorts and the feedback from stakeholders, the ‘Enabling Framework for Regulatory Sandbox’ has been updated to include ‘On Tap’ application facility for themes of closed cohorts.

  • An ‘on-tap’ facility would mean the RBI will accept applications and grant license for banks throughout the year. The policy allows aspirants to apply for universal bank license at any time, subject to the fulfillment of the set conditions. It is for the first time in post nationalization phase that there comes such an open bank license policy.

Recent Related News:

i.On 4th July 2022 HDFC Bank received no objection letter from Reserve Bank of India (RBI) merging HDFC (Housing Development finance Corporation) Ltd and HDFC Bank. BSE Limited and NSE (National Stock Exchange) have also issued observation letters for the proposed merger.

ii.Online payment providers Razorpay, Pine Labs and american payments player Stripe are the 1st players to receive in-principle approval from Reserve Bank of India for payment aggregator (PA) and Gateway licence.

About Reserve Bank of India (RBI):

i.The Reserve Bank of India was established on April 1, 1935, in accordance with the provisions of the RBI Act, 1934.
ii.The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937.
iii.Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the Government of India.