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Indian Digital Currency Era – A Quick Look

Compared to more conventional forms of money like cash notes or coins, electronic money stored in bank accounts, mobile banking applications, and credit cards is quickly replacing the public's perception of finance.

The popularity of UPI demonstrates the preference for digital money systems. India has been pushing hard to become cashless, starting with the decision to implement demonetization in 2016. That same year also saw the launch of the real-time payments system known as the Unified Payments Interface (UPI). The paradox in the existing system is that although digital transactions are becoming more common, cash is still very popular in India.

In terms of transaction value, UPI executed 7.3 billion transactions in October, totaling Rs. 12.11 lakh crore, a record high. While volumes increased 73.3 percent during the same period, transaction values increased by 56.6 percent year over year.

Cryptocurrencies vs. Digital Rupee

A CBDC, as defined by the RBI, is "a legal tender issued by a central bank in digital form. It can be exchanged one-to-one for fiat money and is equivalent to it. All that has changed is its form. "

However, it is impossible to directly compare a CBDC to a cryptocurrency.

"A CBDC is not a commodity or a claim on a commodity or a digital asset, unlike cryptocurrencies. They are not money definitely not a currency in the sense that the term has historically been used, "according to the RBI's release.

According to the tracker maintained by the Atlantic Council, 98 nations are currently investigating CBDCs. Of these, 11 nations have started CBDCs. In light of this situation, the RBI is acting in a calibrated way to start CBDCs. It is currently looking into the possibility of implementing wholesale CBDCs based on accounts and retail CBDCs based on tokens.

"When something new enters the market, the old need to adapt, and the new need to control the change", says Nikhil Kamath, co-founder of Zerodha. "While many have been critical of #CBDC, we might be overlooking the big picture, remittances, unbanked economy, and minimizing subsidy leakage."

The increasing use of cryptocurrency stablecoins, which tie their value to another currency or asset, has also alarmed a number of central banks. According to a Press Trust of India report, RBI officials informed a parliamentary finance committee in 2022 that the 'dollarization' of a portion of the economy by cryptocurrencies could be detrimental to the nation's interests.

Money transfers via cell phones would be quick and easy, according to Sathvik Vishwanath, co-founder, and CEO of Unocoin, a rival cryptocurrency exchange. The digital rupee will most importantly aid in the eradication of problems with counterfeit money.

According to FIS's Cheema, adoption of the CBDC in the wholesale sector (CBDC-W) has large benefits and substantially fewer dangers than in the more complicated domain of retail CBDC (CBDC-R). In the future, CBDC-R will supplement existing payment structures, not replace them.

The digital rupee will therefore be available for use by all Indian citizens whenever the RBI begins to print it.

RBI Employs Tokenization to Combat Breaches


The RBI, the central bank of India, is now prepared to impose card tokenization in India after permitting customers to link credit cards with UPI. In the midst of all of this, many users are perplexed as to what card tokenization actually is and why applications and websites advise users to safeguard their credit and debit cards following the RBI's new rules.
What is tokenization? 

Tokenization is the process of replacing actual card information with a special alternate code called a 'token,' which must be different for each card, token requester, and device, i.e. the organization that accepts customer requests for card tokenization and forwards them to the card network to produce a corresponding token.

Researchers are still quite aware of the data exposures from MobiKwik and Domino's India. As users can see, the data becomes vulnerable to data breaches and leaks if you store your private card information on the cloud servers of numerous such online apps and websites.

Although some websites might have the highest levels of security in place to protect user credit card information, others may not be adhering to international security requirements. Having credit card information being dispersed over several servers with varying levels of security gives hackers more access points. The RBI now wants to alter the current state of digital payments and standardize 'tokenization' to increase the security of all online card transactions.

In September 2021, the RBI ordered that card-on-file (CoF) tokenization be used instead of retailers holding client card information on their systems beginning January 1, 2022. In addition, businesses such as apps, websites, payment processors like RazorPay, or banks will no longer be responsible for safeguarding your card information. Tokenization is a technique the RBI developed to protect domestic card transactions by employing random strings of tokens rather than disclosing the user's personal card information.

Since the regulation on tokenization was published, according to Deputy Governor Sankar, the central bank has been in close contact with all stakeholders to guarantee a smooth transition to the tokenization policy.

How does tokenization work? 

The process of tokenizing cards is straightforward. When a card is chosen to be tokenized, the card network such as Visa, MasterCard, etc. issues the token with the bank's approval and gives it to the retailer. For example, when you save an SBI Visa debit card on Paytm by RBI's requirements, Visa will create the token with SBI's permission and share it with Paytm.

If you decide to save the identical credit or debit card on some other app, let's say Amazon, a new token will be issued and shared with Amazon. The token will vary based on the merchant and device, even if it's the same card. From a security standpoint, it implies the tokens are unique and discrete, which is beneficial.

Potential effects of tokenization

The RBI was forced to develop card tokenization as a result of the constant data leaks, thefts, and breaches that occur in the digital age. Not to add that the various security standards used by apps, websites, payment processors, and other middlemen compromise users' online security.

Tokenization has very little of an effect on the customer. Customers simply need to submit their card information once to receive a token. The process of tokenization will then be initiated by the merchant at no further cost or customer effort.

According to experts, there are no drawbacks to card tokenization from the perspective of the end-user. The RBI standards must be implemented by merchants and payment systems, but aside from that, consumers benefit.

Indian Banks Failing to Protect Their Cyber Security


Indian Banks Failing to Protect Their Cyber Security In Thane, Maharastra some unidentified fraudsters hacked the server and tampered with the data of a cooperative bank. According to Police, the hackers allegedly siphoned off Rs. 1.51 crore to various accounts from the Dombivli Nagarik Sahkari (DNS) bank on March 12. 
Following the attack, a case has been registered against unidentified persons under section 420 (Cheating and dishonestly inducing delivery of property) of the Indian Penal Code (IPC) and section 65 of the Information Technology Act at Manpada police station under the Kalyan division who has started a probe into the incident in collaboration with Thane cyber police.  
The security incident draws light on the issue of bank frauds that have become deep-seated in the Indian Financial System. In just over seven years, Indian banks have witnessed frauds surpassing $5 trillion with total fraud loans amounting to Rs. 1.37 lakh crore in the last year alone.  
Shocking scams like Punjab National Bank (PNB) scam (2018), Cosmos Bank cyberattack (2018), Canara Bank ATM Hack (2018), along with many other vishing, phishing, ATM skimming, and spamming attacks have continued to plague Indian banks over the recent years. With an increase in digital-based transactions, money cheating cases have also witnessed a sharp rise. The techniques and resistance measures employed by banks to safeguard their customers’ financial data and money have met with progressive and sophisticated hacking techniques used by fraudsters in India.  
John Maynard Keynes, after examining the condition of banking in India said banking in India should be conducted on the safest possible principles while calling India a “dangerous country for banking”. The apprehension has proven to be prophetic in the modern world as financial institutions failing to conduct prudent banking have become the center of monetary scams. Reportedly, the State Bank of India (SBI), HDFC Bank, and ICICI Bank constituted a majority of incidents totaling more than 50,000 fraudulent incidents in the last 11 fiscal years.  
Digitalization in India has led to the manifestation of ‘Digital Money’ and cashless transactions have been on a continual rise. Consequently, the protection of data and privacy becomes more important as a fragile cybersecurity system can have serious repercussions for any bank’s customer base.  
Data breaches have emerged to be a serious threat in the banking sector which further amplifies the need for an impenetrable banking system as recovering from data breaches and regaining control of a breached server can be extremely stressful and time-consuming. In order to strengthen the evolution of the banking system, banks require to identify and plug the gaps in security. Part of the problem can be attributed to the accelerated pace of digitization which has increasingly required the same kind of investment on the cyber hygiene side as well.  
Some of the viable measures that banks can undertake include proactive security techniques like ‘Whitelisting’ (blocks unapproved programs while only allowing a limited set of programs to run) and BIOS passwords (prevents external access to systems and servers). Awareness of employees, stringent filtering, and communicating regularly with regional offices are some of the other preventive measures as advised by the security experts.

Chinese Hackers Target Indian SBI Users Via Phishing


Recently Indian officials have reported that China-based cybercriminals are targeting customers of the Indian National Bank State Bank of India (SBI) with phishing scams by offering gifts. Hackers are asking users to update their KYC through a website link as they offer gifts worth around 5 million (INR 50 lakh) from the bank via a WhatsApp message. 

The research wing of New Delhi-based think tank CyberPeace Foundation, in collaboration with Autobot Infosec Pvt Ltd, investigated two similar cases that have targeted SBI customers, as of late. 

"All the domain names associated with the campaign have the registrant country like China," the research team informed IANS. The operational group will send you a message in which you will find a requesting KYC verification, the message will appear to be authentic and will resemble the official SBI online page. 

On clicking the "Continue to login" button, it will redirect the users to a full-kyc.php page, then it will ask them to fill in their credentials like username, password, and a captcha to log in to the online banking. 

"Following this, it asks for an OTP sent to the user's mobile number. As soon as the OTP is entered, it redirects the user to another page that asks the users to enter some confidential information again like account holder name, mobile number, date of birth. After entering the data, it redirects the user to an OTP page," the researchers informed. 

The team of researchers has suggested that the customers should avoid opening such links sent via social platforms, and if anyone finds anything suspicious they are recommended to contact their bank branch.

Indian National Bank (RBI) Governor Flagged Rising Cyber Attacks As Risk


The second wave of deadly COVID-19 has left many countries’ economies in ruins, especially developing countries are undergoing a tough phase. In India, the second wave ruined free economic activities. It's only now that the country is experiencing slight relief in the number of coronavirus cases. Although a third wave is predicted by the experts, the economy seems to be getting back on track, relatively. 

The governor of the Indian National Bank, Reserve Bank of India (RBI), Shaktikanta Das has reported that the pandemic's impact on the overall asset quality has been less than what was expected but rising data breaches and cyber-attacks pose considerable risks for the recovering economy, along with global commodity prices. 

"The recovery that had commenced in the second half of 2020-21 was dented in April-May 2021, but with the wave of infections abating as rapidly as it had set in, economic activity has started to look up in late May and early June," he said in the bi-annual Financial Stability Report of the RBI. 

Further, he added that "stepped-up pace and scale of vaccination" is helping citizens and moderately releasing restrictions on the regional and local area, but they should be cautious while doing so. 

On cyber-attacks, the Financial Stability Report (FSR) disclosed that they have witnessed several attempts by malicious actors targeting the country’s bank payment infrastructure by adopting multiple modus operandi, which includes the theft of payment card personal credentials and compromising ATM infrastructure. 

In this regard, the Indian Computer Security Incident Response Team for the Financial Sector (CSIRT-Fin) under the Indian Computer Emergency Response Team (CERTIn) has published several early warning reports on cyber threats. According to the Intelligence, the alert has issued so that the organizations will be able to mitigate their key infrastructure from cyber attacks.