The proposed entity, which will seek to enhance fraud risk management through real-time intelligence sharing and prevent fraudulent transactions, will be set up as a Section 8 company, or non-profit organisation, said people familiar with the matter.
A committee with members from both public and private banks, ministry of electronics and information technology (MeitY) and the Reserve Bank of India (RBI) will determine the capital contribution, governance structure and minimum paid-up capital for the firm, they said.
The proposed committee will be set up through the Indian Banks’ Association (IBA).
“We expect the final structure to be formalised by month-end. While state-run banks will be the majority shareholder, it is being ensured that there is representation from fintech companies, payment banks and also small finance banks,” said an official, who did not wish to be identified.
Earlier, a committee set up by the RBI, headed by former National Payments Corporation of India chairman AP Hota, had recommended establishing DPIP as digital public infrastructure.”Discussions are on to identify the initial contributing partners and governance structure of the company. This will be a broad-based firm and will look to strengthen existing fraud risk management systems, besides addressing core issues like mule accounts and the need for pre-transaction intelligence,” a bank executive said on condition of anonymity. Mule accounts refer to bank accounts used by criminals for financial crimes, including money laundering.According to experts it becomes difficult for banks to manage it on a standalone basis and hence there is a need for a market infrastructure platform such as DPIP.
“It will allow banks to get an ecosystem view of the frauds and put the right risk mitigants in place on a long-term basis,” said Vivek Iyer, partner and financial services risk leader, Grant Thornton Bharat. “Also, with the data available on one platform, machine learning tools can also be applied to detect anomalies and patterns on a proactive basis and. with the increased data over a period of time, build AI capabilities.”
According to Manoj Ajgaonkar, partner, digital, trust and transformation at Forvis Mazars, fraud prevention platforms themselves are now high-value targets and so the system needs to be protected with strong encryption, limited access and routine testing.
“DPIP will do much to reduce payment fraud while building public confidence in India’s digital payments system,” he said.
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