Cloud Hosting

The Reserve Bank of India (RBI) is working on establishing a cloud facility for the financial sector in India as it looks to enhance the security, integrity and privacy of financial sector data. The service, which will be developed by a subsidiary of the central bank, will directly compete with similar services offered by American companies like Amazon, Google and Microsoft.

The regulator is taking the same approach as the government has done with setting up digital public infrastructure (DPI) where the underlying technology is built by the government, and is later outsourced to the private sector for developing various applications. The biometric identity programme Aadhaar and United Payments Interface (UPI) are key examples of DPI.

Banks and financial entities are maintaining an ever-increasing volume of data. Many of them are utilising various public and private cloud facilities for this purpose. The Reserve Bank is working on establishing a cloud facility for the financial sector in India. The proposed facility would enhance the security, integrity and privacy of financial sector data, RBI said in its statement on developmental and regulatory policies.

The facility will be set up and initially operated by the Indian Financial Technology & Allied Services (IFTAS), a wholly-owned subsidiary of RBI. Eventually, the cloud facility will be transferred to a separate entity owned by the financial sector participants, the central bank said. The service is intended to be rolled out in a calibrated fashion in the medium term.

While details about the cloud service, especially around its adoption, are yet to be released, the fintech industry is looking forward to whether the central bank would require companies to switch to its cloud offering. The regulator already has an exhaustive set of norms of localisation of data, and many in the industry believe that the cloud service could take those norms a step further.

The cloud service could effectively help centralise data/services hosting for financial institutions. Effectively, it implies that at some point, banks, NBFCs, and other participants might be nudged to store their data on this cloud rather than on third-party services that are currently in vogue. This might help financial institutions access a cloud facility that ensures data security, integrity, and automatic compliance with the relevant regulatory guidelines, said Rajat Deshpande, CEO and co-founder, FinBox.

RBI Deputy Governor T Rabi Shankar said that the cloud service could be useful for smaller companies, as he ruled out assertions that it was also a step towards data sovereignty.

for smaller entities, cooperative banks and those things, this provides a lot of efficiency in terms of scale, because for each one to maintain their database could involve a large amount of investment, skill and all that which this cloud is expected to provide, Shankar said.

The Indian Express Pvt Ltd

First published on: 08-12-2023 at 23:36 IST

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RBI to offer cloud storage services as part of digital public infrastructure - The Indian Express