Shaktikanta Das: Digital public infrastructure and emerging
technologies
Inaugural address by Mr Shaktikanta Das, Governor of the Reserve Bank of India, at
the RBI@90 Global Conference on "Digital Public Infrastructure and Emerging
Technologies", Bengaluru, 26 August 2024.
* * *
We are celebrating the 90th year of the Reserve Bank of India in the current financial
year. This Global Conference on 'Digital Public Infrastructure and Emerging
Technologies' is among the marquee events that we are organising to commemorate
this significant milestone. It is my pleasure to extend a warm welcome to each one of
you to this conference, held in the beautiful and vibrant city of Bengaluru-a city which,
for many years now, has been at the forefront of India's technology revolution. I would
also like to extend a special welcome to the esteemed participants who have joined us
from across the globe. Thank you all for accepting our invitation. I sincerely hope that
you will find the deliberations and interactions during the Global Conference enriching
and productive.
The theme of this conference - Digital Public Infrastructure (DPI) and Emerging
Technologies - is timely and relevant. It will shape the future journey of almost all
economies in the world. Over the last decade, the traditional banking system has
undergone an unprecedented technological transformation. By all indications, this
process is likely to become even more intense in the coming years. In my address
today, I would like to highlight the important role that DPI has played in India's
digitalisation process and its contribution to inclusivity in Indian society and economy.
India's experience provides an effective digitalisation strategy for public authorities
including central banks. I would also touch upon certain key issues underpinning
Artificial Intelligence systems and the use of DPI in addressing issues in cross-border
payments.
Meaning and Positive Impact of DPI
Digital Public Infrastructure refers to basic technology systems, created mainly in the
public sector, that are openly available to users and other developers. DPIs are
scalable, and thus can support systems that operate on a population-wide scale; they
are interoperable, and therefore spur innovation by being accessible to innovators; and
they are also cost efficient by virtue of their economies of scale. These three
advantages of scalability, interoperability and cost efficiency hold the potential to
accelerate financial inclusion and transform the lives of people by overcoming
traditional barriers like physical distance, documentation and transaction costs.
It can be said that DPI has enabled India to achieve, in less than a decade, levels of
financial inclusion that would have otherwise taken several decades or more. DPI spurs
market innovation by reducing transaction costs, democratising access, maintaining
competition through interoperability, and attracting private capital. DPI offers a path to
effectively manage critical national infrastructure. In times of crisis, as during the
COVID-19 pandemic, India and a few other countries were able to leverage digital
infrastructure for vaccination programmes and targeted transfer payments.
Notable examples of DPIs in other countries include verifiable digital identity systems
such as Colombia's Cédula Digital; Nigeria's National ID or Bank Verification Numbers;
the Philippines' PhilSys; Rwanda's digital identity system managed by their National
Identity Agency (NIDA); Saudi Arabia's Nafath digital identity management platform;
Singapore's Singpass; the United Arab Emirates' UAE-Pass; and the like.
The G20 Digital Economy Working Group (DEWG) developed the Global DPI
Repository (GDPIR), which is a comprehensive resource hub, pooling essential lessons
and expertise from G20 members and other participating countries. Its primary aim is to
bridge the knowledge gap in the choices and methodologies required for the design,
construction, deployment, and governance of DPIs. The final 'Report of India's G20
Task Force on Digital Public Infrastructure' was released on July 15, 2024 which has,
among other things, contributed to acceptance of the definition and framework of DPI.
This agenda will be taken forward for implementation during the subsequent G20
Presidencies.
India's Experience with DPI
Let me now turn to India's experience with DPIs. India's DPI journey is a unique model,
wherein the base technical infrastructure is built, operated and managed in the public
sector, while the private sector accesses the DPI to create innovative customer facing
services. The advantage of developing DPI in the public sector is that typically private
sector would be averse to capital investment to create infrastructure with uncertain
returns. Privately created infrastructure may not also be amenable to democratised
access or interoperability. The unique approach of India is conducive for designing
services and products which are competitive in the open market.
8. In the area of finance, systems that facilitate digital payments, digital money, digital
identity and digital processes are the key components of DPIs. India has carefully
crafted its DPI strategy by focusing on three critical dimensions - digital identity, bank
accounts and processing infrastructure. Aadhar, India's biometric identity system
1
provides a single and portable proof of identity. Around 1.4 billion Aadhaar numbers
have been generated for the residents of India which is near universal for the Indian
population. Similarly, access to banking system for the unbanked segments has been
2
enabled through Jan Dhan accounts i.e. Basic Savings Bank Deposit (BSBD)
3
Accounts. Under the Jan Dhan scheme, more than half a billion bank accounts have
been opened for the beneficiaries. With regard to processing infrastructure, basic
connectivity has been ensured through availability of affordable mobile phones and
internet. The number of mobile based internet users in India stands at around 0.9 billion4
in May, 2024, with mobile tele-density at 83 percent. Even in rural areas, the mobile
teledensity is around 60 percent. The trinity of Jan Dhan Accounts, Aadhar and Mobile
Phones, popularly known as the JAM trinity, has provided the base DPI infrastructure
which is being leveraged for multiple value added services. Over 67 percent of the
beneficiaries under the JAM trinity initiatives are from rural/semi-urban areas and over
55 percent are women. This clearly demonstrates the role of DPIs in promoting
inclusion.
9. Another example of DPI in India is the Account Aggregator (AA) framework, a
regulatory initiative of the Reserve Bank. This framework facilitates consent-based
sharing and aggregation of financial information of customers among eligible financial
system participants in a secure, transparent, and efficient manner. It enables MSMEs to
access cash flow-based financing from lenders with minimal documentation.
10. The Reserve Bank, over the years, has facilitated the development of robust
systems in the country for both retail and wholesale payments by supporting the
creation of digital infrastructure like INFINET banking network, SFMS messaging
5
system, RTGS and NEFT payment systems. The current ecosystem of digital
payments in India offers a bouquet of simple, safe, and secure options for instant or
quick transfer of funds, both large and small value, for businesses and individuals.
11. Unified Payments Interface or UPI, a real-time payment system launched in India in
April 2016 by the National Payments Corporation of India (NPCI), has played a
significant role in the growth of retail digital payments in India. NPCI itself was promoted
by banks under the guidance of the Reserve Bank. While initial participants on the UPI
platform were banks, non-bank third party app providers and use of QR codes have all
combined in popularising UPI. It has since emerged as a robust, cost effective and
portable retail payment system and is attracting active interest across the globe.
12. Continuing on this journey of digitalisation of banking services, last year we
launched the pilot of a technology platform which enables frictionless credit. From now
on, we propose to call it the Unified Lending Interface (ULI). This platform facilitates
seamless and consent based flow of digital information, including even land records of
various states, from multiple data service providers to lenders. This cuts down the time
taken for credit appraisal, especially for smaller and rural borrowers. The ULI
architecture has common and standardised APIs, designed for a 'plug and play'
approach to ensure digital access to information from diverse sources. This reduces the
complexity of multiple technical integrations. It enables borrowers to get the benefit of
seamless delivery of credit, quicker turnaround time without requiring extensive
documentation. In sum, by digitising access to customer's financial and non-financial
data that otherwise resided in disparate silos, ULI is expected to cater to large unmet
demand for credit across various sectors, particularly for agricultural and MSME
borrowers. Based on our experience from the pilot project, a nation-wide launch of the
ULI will be done in due course. Just like UPI transformed the payments ecosystem, we
expect that ULI will play a similar role in transforming the lending space in India. The
'new trinity' of JAM-UPI-ULI will be a revolutionary step forward in India's digital
infrastructure journey.
13. Central Bank Digital Currency (CBDC) has dominated recent policy discourse
across the world. In India, the Reserve Bank launched CBDC pilots in both retail and
wholesale segments in late 2022. The retail pilot currently has over 5 million users and
16 participating banks. While the retail pilot started with initial use case of payments,
currently both the offline and programmability functionalities are also being tested. The
programmability feature of CBDC could serve as a key enabler for financial inclusion by
ensuring delivery of funds to the targeted user. Let me illustrate this by an actual pilot
6
that was launched recently . Tenant farmers often find it difficult to access agricultural
credit for inputs and raw materials as they do not have the land title to submit to the
banks. However, programming the end use for purchase of agricultural inputs can give
the required comfort to banks and thus establish the identity of a farmer not through his
land holding but through the end use of funds being disbursed. Yet another path
7
breaking use case is farmers getting purpose bound money through programmable
CBDC for generation of carbon credits. Other new use cases aimed at testing features
such as anonymity and offline availability are proposed to be rolled out gradually.
14. It is important to emphasise that there should not be in any rush to roll out
systemwide CBDC before one acquires a comprehensive understanding of its impact on users,
on monetary policy, on the financial system and on the economy. Such understanding
would emerge from generation of user data in pilots. Actual introduction of CBDC can
be phased in gradually. Undoubtedly, CBDC has the potential to underpin the payment
systems of future, both for domestic payments and also cross-border payments.
Artificial intelligence and DPI
15. Today, as Artificial Intelligence (AI) is making forays in the financial sector in the
form of services like chatbots, internal data processing for intelligent alerts, fraud risk
management, credit modelling and other processes. Integrating this cutting-edge
technology into a robust and responsible DPI presents an opportunity to amplify the
capabilities and efficiency of DPI even further. As the Report of India's G20 Task Force
on DPI states, the seamless fusion of DPI with AI would propel us into a new world of
"Digital Public Intelligence". Integration of AI into financial services brings significant
opportunities for all stakeholders. For customers, AI enables hyper-personalised
products and faster, more relevant services. Financial institutions like lenders benefit
from advanced tools for risk and fraud management, streamlined operations, and
reduced compliance costs. Regulators gain enhanced oversight and real-time
monitoring capabilities, which would improve regulatory enforcement and market
stability.
16. Such advancements, however, come with serious challenges. Data privacy
concerns arise from handling vast volumes of personal information. Ethical AI
governance is essential to ensure fairness and prevention of bias. Financial institutions
must ensure that AI models are explainable, i.e., ability to explain why certain results
are produced. AI technology can also be misused to spread misinformation, potentially
causing severe damage and disruption to DPIs as well as other digital systems. They
can also damage the reputation and operations of financial institutions. Recognising the
same, international bodies such as the Organisation for Economic Cooperation and
Development (OECD) have outlined core principles governing AI, which include
inclusive growth, respect for the rule of law and human rights, transparency and
explainability, robustness and safety, and accountability. In December 2023, the
Hiroshima AI Process Comprehensive Policy Framework was established. It includes a
set of guiding principles and a code of conduct, marking a significant step towards a
coordinated global approach for responsible development of AI.
17. India is the lead chair of the Global Partnership on AI (GPAI) for 2024. This
multistakeholder initiative, with 29 countries, aims to bridge the gap between AI theory and
practice by supporting cutting-edge research and advancing applied activities. The
Ministry of Electronics and Information Technology (MeitY) of Government of India has
been taking important initiatives in this area, such as setting up AI Research Analytics
and Knowledge Dissemination Platform which will focus on developing indigenous
AIenabled products and solutions to tackle India-specific challenges and complex real-life
problems. These initiatives underscore India's commitment to not only capitalise on the
potentialities of AI technology, but also ensure robust governance.
18. I am pleased to know that in this conference a panel discussion will focus on
emerging technologies. I am sure they will look into various issues associated with
technologies like AI. It is important to be pro-active to leverage the capabilities of new
technologies, but at the same time it is essential to be abundantly mindful of the
associated risks and challenges. It would be prudent to keep in mind the following
aspects:
(i) AI is a data driven science. The authenticity of data being used in training the
models, possibility of biases, concerns of data privacy need to be carefully examined.
(ii) AI promises to make processes simpler and efficient. It can also emulate decision
making to a great extent. However, when it comes to the regulated financial institutions,
there should be careful adoption of AI in critical decision-making segments, for example
in loan sanctioning. While AI can definitely assist the process, the institutions using
them should have proper understanding of the models and ensure accountability of the
outcomes.
(iii) Going beyond understanding the risks posed by AI, financial institutions should
clearly outline the liabilities and ensure a calibrated and responsible adoption. Central
banks and governments, on their part, should foster the development of trustworthy AI,
keeping data privacy, explainability, accountability and transparency at its core.
DPI and Cross-border Payments
19. A recurring agenda of importance across all multilateral settings including the G20
and international standard setting bodies like the Committee on Payments and Market
Infrastructures (CPMI) has been to bring efficiency to cross-border payments. A lot of
initiatives and experimentation in bi-lateral and multi-lateral arrangements among
various countries are already underway. While much efficiency has been achieved in
case of wholesale markets, the retail cross-border space is still fraught with multiple
layers that add to the cost and delays in cross-border remittances. Needless to say that
modern technology offers solutions which can smoothen these frictions. With the
emergence of Fast Payment Systems across countries and experimentation around
CBDC, new possibilities are opening up to bring in greater efficiency to cross-border
payments. Maximum efficiency gains in such initiatives would come from ensuring
interoperability as a key design element.
20. Ideally, while the legacy payment systems should be able to connect to each other
and so should the CBDC systems, one country's legacy system should also be
interoperable with another country's CBDC. Actual implementation of interoperability
would pose challenges and may involve certain trade-offs. Technical barriers may be
surmounted by using common (international) technical standards. Further, the
governance structure or management framework for long-term sustainability would also
need to be finalised.
21. In this journey of attaining harmonisation and interoperability among countries, a
key challenge could be the fact that countries may prefer to design their own systems
as per their domestic considerations. We can overcome this challenge by developing a
plug and play system which allows replicability while also maintaining the sovereignty of
respective countries. India has made some progress in this direction and would be
happy to develop a plug and play system for the benefit of the community of nations.
22. The UPI system has the potential to evolve into a cheaper and quicker alternative to
the available channels of cross-border remittances. A beginning can be made with
small value personal remittances as it can be quickly implemented.
Conclusion
23. India is a vast country with great diversity. A solution that works well in India has the
potential to be customised to the unique requirements of any other country.
Accordingly, the conference planners have organised a deep dive session on Day-2 on
India's UPI, especially for the international delegates. I would request all delegates to
participate and derive benefit from the various sessions and also share their
experiences which could provide learnings for all. I also invite you to the Conference
Exhibition, showcasing some of India's innovations relevant to this conference.
24. As you may recall, the theme of India's G20 presidency in 2023 was "One Earth,
One Family, One Future". It underlies India's thought process in how it sees the world
and itself as being part of one family with a common future. At the Reserve Bank of
India, we look forward to the journey towards RBI@100 with considerable optimism. We
are constantly working on devising policies, approaches, systems and platforms that will
make our financial sector stronger, nimble and customer centric. With these words, I
wish you all a pleasant stay and productive discussions. I wish this conference all
success.
Thank you and Namaskar.
1
https://uidai.gov.in/aadhaar_dashboard/
2
In such savings bank accounts, there is no requirement of maintaining any minimum
balance. Such accounts also offer certain minimum facilities, free of charge.
3
https://pmjdy.gov.in/
4
https://www.trai.gov.in/release-publication/reports/telecom-subscriptions-reports
5
INFINET (Indian Financial Network): A closed user group network comprising of RBI
and financial institutions. This provides the communication backbone for the Indian
banking and financial sector.
SFMS (Structured Financial Messaging System) is a secured financial messaging
system which is used for both inter-bank and intra-bank communications in India.
RTGS (Real Time Gross Settlement) is a 24x7x365 electronic fund transfer system for
large value transactions (2 lakh and above) in which transactions are processed
continuously on a gross basis (i.e. transaction by transaction basis).
NEFT (National Electronics Fund Transfer) is a 24x7x365 retail electronic fund transfer
system in which the transactions are processed in batches.
6
The pilot was launched by SBI on August 16, 2024 in the states of Odisha and Andhra
Pradesh.
7
IndusInd Bank piloted the same in Maharashtra