Mumbai (Maharashtra) [India], November 10 : India's experience in digitisation shows that countries that harness technology with foresight and responsibility will not only adapt to change but shape it, T Rabi Sankar, Deputy Governor, Reserve Bank of India, said.
Speaking at the 12th SBI Banking & Economics Conclave - 2025 in Mumbai on November 7, excerpts of the speech were released today. He delved into a theme that resonates in the current era of disruptions and rapid change: the role of technology in banking.
Every aspect of finance, from payments and credit to savings, investments, regulation and supervision, is already being redefined through technology, he said.
"With powerful technologies like artificial intelligence (AI) and quantum computing already under way, our challenge is how to embrace them with wisdom and purpose, and ensure that technological evolution is secure, inclusive, resilient, and future-ready," the RBI Deputy Governor said.
India's uniquely successful model of leveraging Digital Public Infrastructures (DPIs) like Aadhaar or UPI has not only positioned India as a leading example of digitisation, but also it has set an example for other countries to follow, he said.
"For transformational change, it is not enough that technology is ubiquitous, it should also be foundational," he added.
If one look's back today, he said one would see that India's banking system has passed through two-and-a-half decades of innovations in payment technology - starting from ATM networking and moving through a gamut of retail and wholesale digital payment instruments like RTGS, NEFT and IMPS to the game-changing UPI and continuing on to experimenting with digital currency.
He also delved into the vulnerability by using the context of UPI.
"UPI is essentially a payment instrument that transfers funds from one bank account to another (it can also use wallets, but that is a negligible part of the volume, so we will ignore it for this purpose). All UPI transactions are therefore payment transactions made through banks. Yet when we talk of UPI, the first entity that comes to mind is not a bank but a non-bank UPI app," he said.
Touching upon UPI, he said acquisition of customers and their payments data, was enough of an incentive for these app providers to extend these services even in the absence of any revenue.
It is also important to appreciate that these FinTechs had certain basic advantages - Technology edge, Data advantage, Cost advantage, he noted.
"These advantages were large, and it can be reasonably argued that banks were unfairly disadvantaged (higher regulatory burden, frictions of KYC process and AML checks). In a competitive market, banks would have recovered their higher costs from the fintechs, but then, adoption of new technology would probably have suffered. But even without these disadvantages, it would be reasonable to assume that banks just did not foresee the potential in UPI that the FinTechs did. Part of the explanation lies in the very nature of banks," he explained.
Delving on what could be the strategic imperatives for banks to prepare for transformative technologies, he said modernising core infrastructure to make it less monolithic and rigid is one such imperative if banks have to compete with the fintech ecosystem.
"Perhaps the most important requirement is reengineering the culture of innovation within banks and creating incentives for learning and skill upgradation from within. Human expertise to innovate, govern, and responsibly deploy technology remains the differentiator in a digital world. Institutions must cultivate deep digital and data skills at all levels, ensuring teams are equipped to navigate complexity and seize opportunities," the RBI deputy governor said.
Equally importantly, banks need to treat fintechs as partners in innovation and create a mutually beneficial or symbiotic strategic partnerships with them, he suggested. "The objective should be to benefit from the agility of fintechs without compromising prudential discipline."
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