Finance Technology

🎯 PYQs — Fintech (High Frequency)

Most Asked Topics:

• CBDC vs Private Cryptocurrencies
• UPI ecosystem and features
• Stablecoins and Blockchain
• Payment settlement systems (RTGS, NEFT)

Common Traps:

• ❌ e-RUPI is NOT the same as Digital Rupee (e-RUPI is a voucher; Digital Rupee is currency)
• ❌ UPI transactions are NOT settled via NEFT (they use the IMPS rail)
• ❌ Stablecoins are NOT risk-free (algorithmic versions like TerraUSD can collapse)

1. Crypto Assets & Regulation

Types of Stablecoins

Compare the three types of Stablecoins: Fiat-Collateralized, Crypto-Collateralized, and Algorithmic.

Types of Stablecoins: - Fiat-Collateralized: Backed by reserves of fiat currency (USD/EUR). Examples: Tether (USDT), USDC. - Crypto-Collateralized: Backed by other cryptocurrencies (typically over-collateralized). Examples: DAI. - Algorithmic: Price maintained by supply-control algorithms. Examples: TerraUSD (Collapsed). Risks: Run risk (mass withdrawal), lack of elasticity, and reserve transparency issues.

Regulation in India

Detail crypto asset regulation in India and the global context.	India's Regulatory Framework: - Taxation (2022): 30% tax on gains from Virtual Digital Assets (VDAs). No set-off of losses allowed. - PMLA (2023): VDAs brought under the Prevention of Money Laundering Act, requiring intermediaries to follow KYC and reporting norms. Global Context: The EU's MiCA (Markets in Crypto-Assets) is the world's first comprehensive regulatory framework.

2. Central Bank Digital Currency (e₹)

Digital Rupee (e-Rupee)

Define the Digital Rupee (e-Rupee) and contrast its Retail and Wholesale forms.

Digital Rupee (e-Rupee): Digital form of sovereign currency issued by the RBI; a direct liability of the central bank. Key Features: Legal tender status (guaranteed by government), settlement finality (like physical cash, no intermediary risk), and programmability for specific intended use. Types: - Retail (e₹-R): For the general public and merchant transactions. - Wholesale (e₹-W): For interbank and securities settlement.

e-RUPI: Purpose-Specific Voucher

What is e-RUPI, who developed it, and how does it prevent leakage?	e-RUPI: Contactless, cashless digital voucher delivered via SMS or QR code. Developed by NPCI on the UPI rails. Core Benefits: - Accessibility: Can be redeemed on feature phones without a bank account or internet. - Targeted Delivery: Purpose-specific (e.g., vaccine or fertilizer subsidy), ensuring zero leakage. Limit: ₹1,00,000 per voucher; allows multiple uses until exhausted.

3. Digital Payments Ecosystem

Settlement Infrastructure

Compare IMPS, NEFT, and RTGS on settlement, netting, value limits, and operators.	Payment Settlement Systems: - IMPS: Real-time settlement; Gross netting; Value limit up to ₹5 Lakh; Operated by NPCI; 24/7 availability. - NEFT: Half-hourly batch settlement; Net (DNS) netting; No value limit; Operated by RBI; 24/7 availability. - RTGS: Real-time settlement; Gross netting; Minimum value ₹2 Lakh (no max); Operated by RBI; 24/7 availability.

Unified Payments Interface (UPI)

Outline UPI: architecture, security, UPI 2.0 features, offline tools, and international adoption.

UPI Architecture & Security: Real-time system built on IMPS rails, secured by 3-factor authentication (Device ID, Bank account, UPI PIN). UPI 2.0 Features: Overdraft account linking, AutoPay (recurring payments), and pre-authorizing mandates. Access Points: - UPI Lite: On-device wallet for small-value, high-frequency offline transactions. - 123PAY: Voice-based (IVR), missed call, and sound-based payments for feature phones. International Adoption: UPI One World (for tourists); used in UAE, France, Singapore, Mauritius, Sri Lanka, Nepal.

SWIFT Messaging System

What is SWIFT, its role, and its geopolitical significance?	- SWIFT: Society for Worldwide Interbank Financial Telecommunication (Belgium). Role: Secure messaging system for instructions; does not transfer money itself. Serves 11,000+ institutions across 200+ countries. Geopolitical Use: Exclusion from SWIFT (sanctions) isolates a country's financial system from international trade.