Role of Emerging Digital Technologies in Central Banking and Finance highlighted at SAARC-FINANCE meet | Current Affairs | Vision IAS
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  • Network of Central Bank Governors and Finance Secretaries of the SAARC Region(SAARCFINANCEwas established in 1998.
    • Objective: to share experiences on macroeconomic policy issues among member countries of the region.
  • Emerging Digital Technologies(EDT) are new-age technologies such as distributed ledger technology, artificial intelligence, application programming interfaces etc 

 

  • Opportunities provided by EDT for the financial sector
    • Data–driven policy-making: helps detect trends and anomalies better and thereby provides useful input for policy formulation.
    • Regulatory compliance: Automating compliance processes, conducting risk assessments, and monitoring transactions can enhance adherence to complex financial regulations.
    • Design new products and services: Helps central banks to design new products and services to cater to specific requirements like Central Bank Digital Currency.
    • Improve efficiency: help eliminate paperwork, streamline operations, and boost employee productivity. 

 

  • Challenges associated with EDT
    • Concerns arise about transparency, data biases, governance, privacy and the robustness of algorithms.
    • Cyber risk with the proliferation of fraudulent apps, deep fakes, and mis-selling through dark patterns.
    • Fragmentation of the financial world as differing systems can divide user groups and countries from each other.
    • Issue of digital financial exclusion as users will not be aware of the advanced products released using EDT.

 

Use of EDT in the Indian financial sector

  • Almost three-fourths of Indian banks and NBFCs have developed chatbots and virtual assistants.
  • RBI is working on establishing a cloud facility for the financial sector in India.
  • RBI Facilitated responsible innovation in the financial sector through initiatives like regulatory sandbox.
  • NPCI is upgrading India’s fast payment system – the Unified Payment Interface (UPI).

 

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