Customer privacy, data protection non-negotiable, says RBI Dy Governor M Rajeshwar Rao
Customer privacy, data protection non-negotiable: RBI Dy Governor
Reserve Bank Deputy Governor M Rajeshwar Rao has said that technological innovation in banking is of paramount importance but cannot be pursued at the cost of customer privacy and data protection which are non-negotiable. "We must generate trust amongst the customers that their data is safe and secure in all their financial relationships with regulated entities and for that - innovation and regulation should go hand-in-hand," he said while speaking at a webinar on Open Banking organised by Tata Consultancy Services (TCS) in association with the Embassy of India in Brazil on April 14. RBI posted the speech on Friday.
Open banking refers to sharing and leveraging of customer-permissioned data by banks with third-party developers and firms to build applications and services, including for example those that provide real-time payments, greater financial transparency options for account holders, marketing and cross-selling opportunities. All stakeholders, Rao added, "need to appreciate the fact that while technological innovation is of paramount importance, the customer privacy and data protection are non-negotiable."
He said stressed that "we must generate trust" amongst the customers that their data is safe and secure in all their financial relationships with regulated entities and for that - innovation and regulation should go hand-in-hand. The RBI Deputy Governor noted that in contrast to the open banking initiatives witnessed in some countries, India has embraced an approach where both the regulator and the market have collaborated for the development of the open banking space.
In India, RBI and NPCI came out with a payment system like UPI and released its Application Programming Interfaces (APIs) for the banks and third-party app providers to build upon. The market participants, Rao said are also driving innovation and many banks are releasing their own APIs and joining forces with the fintech companies to provide better experience to their customers. Moreover, with the launch of Regulatory Sandbox and Reserve Bank Innovation Hub, RBI's approach has been that of encouragement and guidance, he said.
India kickstarted its approach to open banking by enabling an intermediary which will be responsible for the customers' consent management. These intermediaries are licensed as Non-Banking Financial Companies. In September 2016, RBI announced creation of a new licensed entity called Account Aggregator (AA) and allowed them to consolidate financial information of a customer held with different financial entities, spread across financial sector regulators.
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