As India transitions to a digital economy, the Reserve Bank of India’s (RBI) in its Currency and Finance (RCF) report on Monday (29 July, 2024) highlights that technology adoption has enhanced the efficiency of banks and increased competition in the sector.
RBI says that adopting digital technologies has improved the efficiency of banks in India and increased competition within the banking sector. Overall, digitalization in the financial sector allows banks to reduce various risks and enhances integration across financial markets, thereby boosting liquidity in these markets.
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Digital Infrastructure and Growth
RBI says India’s digital infrastructure has been a major factor in its digital success. With internet penetration hitting 55% in 2023, the country has gained 199 million new internet users over the past three years.
India offers the lowest cost per gigabyte (GB) of data worldwide, at an average of Rs 13.32 (US$ 0.16) per GB. This affordability has led to one of the highest mobile data consumption rates globally, with the average user consuming 24.1 GB per month in 2023.
The country has around 750 million smartphone users, a number projected to reach nearly one billion by 2026. India is also set to become the second-largest smartphone manufacturer within the next five years.
Additionally, India boasts the world’s third-largest startup ecosystem, with over 140,000 startups and more than 100 unicorns.
According to RBI, India is leading the digital revolution, utilizing its strong digital public infrastructure, a thriving FinTech ecosystem, and a supportive policy environment to become the world’s fastest-growing digital economy.
Digital technologies are creating new opportunities in financial inclusion, fiscal transfers, and cross-border trade and remittances.
The report reviews India’s digital progress so far, identifying both emerging opportunities and challenges through surveys of key stakeholders and data analysis.
Cybersecurity and Data Privacy
RBI says that a strong regulatory framework positively impacts consumer confidence in digital financial products, enhances operational and technical efficiencies in financial institutions, and promotes more liquid and integrated financial markets.
However, digital technologies also bring challenges, such as cybersecurity threats, data privacy issues, vendor and third-party risks, customer protection, the need for upskilling and reskilling, and the complexity of financial products and business models.
RBI report reveals that the average cost of data breaches in India has increased to $2.18 million in 2023, which is a 28% rise since 2020.
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On a global scale, the cost of cybercrime is projected to hit $13.82 trillion by 2028, up from $8.15 trillion in 2023.
In India, the most frequent cyberattacks are phishing, accounting for 22% of incidents, and stolen or compromised credentials, making up 16%.
Whereas, the main policy challenge is to balance financial stability, customer protection, and competition while fostering an environment that supports innovation.
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