Reserve Bank of India (RBI) Governor Urjit Patel is answering critics with a high-end technology company. The Reserve Bank Information Technology Private Limited (ReBIT) is a bold and ambitious move by the central bank to secure critical financial data, store and analyse transaction records and defend cyber and digital assets essential for a robust monetary system. It’s rare for a regulator to float its own company, rarer still for a central bank. Patel has been the target of some ire over his apparent lame duck approach to demonetisation and the emerging digital and cashless economy. A company like ReBIT could not have been conceived overnight, more so when it includes corporate and innovation heavyweights like the new Tata Sons Chairman N Chandrasekaran and Prof. Deepak Phatak of Indian Institute of Technology (IIT), Bombay. There are three clear implications emerging out of this move to establish ReBIT.
The first implication is perceptual. It is that a confident central bank is stepping out and saying that the digital economy is here to stay, and cashless is the way forward. By setting up ReBIT with four mandates of cybersecurity, research and innovation, systems audit and project management, the RBI is also showcasing its intellectual depth and foresight in conceiving the cashless economy as a system and a set of processes, rather than as a patchwork quilt of quick fixes thrown over an old, analog, informal and a highly inefficient monetary system. Usually, regulators always play catch up. But RBI seems all set to buck this trend. If one were to use the software industry analogy, the Reserve Bank of India is setting itself up very nicely to rewrite the code of the Indian monetary and economic system: from analog to digital. It’s absolutely critical that a public institution with the larger public good at its heart rewrites the code of the emerging digital and cashless economy, rather than a group of market players who will more often than not be guided by the principles of self interest and profit.
The second implication is concrete. A company like ReBIT allows RBI to derive particular insights that can only come from a dedicated big data and analytics play. Access to financial, monetary and transaction data will help the bank gauge the pulse of all the sectors of the Indian economy. With real time data, and the ability to mix, match and mash up such information, which is what the research and innovation pillar of ReBIT would be expected to do, the RBI in the longer run would be able to roll out a more realistic monetary policy. Everything from Cash Reserve Ratio (CRR), interest rates, purchasing power of the rupee, wholesale and consumer inflation, availability of credit for critical sectors like farming and manufacturing will be positively impacted. In short, a good and robust monetary policy leads to a good and robust economy. With big data play, we Indians can expect our rupee to last longer, become stronger, and get us more bang for our buck. We will also pay lower interest rates, tax rates and will be able to live in a more affordable economic ecosystem.
The third implication is sobering. In some ways, the central bank is indirectly saying that the government is not really prepared, in the cyber sense of the term, for the higher order tasks that complex digital financial systems require and demand. If one were to extend this logic, it’s a clear lack of confidence, indictment if one were to inject more passion into it, in the existing cybersecurity capabilities available with National Informatics Centre (NIC) and the various departments and units of the Ministry of Information Technology. With ReBIT, the central bank is taking up the responsibility for the security and privacy of the public data that gets generated from individual and collective financial transactions that take place. Implicit in this responsibility is a question that needs to be answered by the government: who is going to be responsible and accountable for the safety, security and privacy of the data generated due to digital transactions at the level of banks, mobile wallets and para-banking institutions?