RBI Keeps a Watchful Eye on Foreign UPI Apps as Money Laundering Concerns Grip Fintech Companies

GG News Bureau
New Delhi, 15th Feb. The Reserve Bank of Bharat has placed strict surveillance on banks and fintech companies in order to prevent the country from facing a financial crisis. There are constant streams of reports indicating that the Reserve Bank of India (RBI) has imposed fines on both small and large banks in the country. However, this time, the Reserve Bank of India also initiated stringent measures against Paytm Bank. In which he was compelled to cease his services due to suspicion of money laundering. The subsequent course of action may entail eliminating the dominance of foreign fintech enterprises in Bharat.

🚨 Important update for @Paytm users!

Your Paytm app is UNAFFECTED by recent RBI directives on Paytm Payments Bank. 📱💳

Paytm and Paytm Payments Bank Ltd. are separate entities.

You can continue using all services seamlessly, including recharges, bill payments, movie… pic.twitter.com/EsFTMeRXiQ

— YourStory Ecosystem (@YSEcosystem) February 13, 2024

Money laundering has become more prevalent

In fact, it is possible that domestic fintech firms will be promoting the UPI market, thereby ending the dominance of foreign applications such as PhonePe and Google Pay. In its report submitted to the government, the parliamentary committee on communications and information technology expressed concern about the high share of foreign fintech apps. This committee has recommended the promotion of domestic applications. The committee has stated that foreign fintech companies and applications hold a significant share in the Bharatiya UPI sector. The committee has caused concern to these foreign companies by stating that numerous fintech companies are being utilized for the purpose of money laundering.

A limit of 30% market share will be set

As per the data provided, it can be observed that in terms of transaction volume during the period of October-November 2023, PhonePe’s market share was 46.91%, while that of Google Pay was 36.39%. In this particular matter, the Bharatiya application BHIM UPI is significantly behindhand. In such a situation, it is evident that the Bharatiya UPI market is entirely dominated by foreign companies such as Walmart’s Phone Pay and Google Pay.

The National Payment Corporation of India, commonly known as NPCI, has proposed to limit the share of fintech applications in the domestic market to a maximum of 30%, based on the volume of UPI transactions expected to commence in the upcoming year. The committee has stated in its report that it will be more convenient for RBI and NPCI to oversee Indian fintech applications in comparison to those of foreign companies.

Domestic fintech companies will benefit greatly

The report suggests that attention should be paid to promoting domestic companies in the fintech sector. The BHIM UPI, which was developed indigenously, serves as a noteworthy illustration of this concept. Although its share in the UPI market is very low, the report indicates that Bharat is increasing its focus on promoting Make in India. Therefore, the Committee believes that domestic entities should be promoted in the FinTech sector.