Placing emphasis on customer protection around financial technology, Reserve Bank of India (RBI) Governor Shaktikanta Das on Tuesday reassured stakeholders that the regulatory entity supports innovations, particularly around lending, but they must be responsible.
“The recently issued digital lending guidelines support innovation. While innovations are very much welcome, they must also be responsible. The need of the hour is to assure safety in digital loans. We assure all fintechs that we support innovation, but regulatory compliance comes first, among others,” he said.
Speaking on the sidelines of the Global Fintech Fest 2022, the governor flagged concerns around mushrooming of digital lending apps and their practices.
“Expansion of digital lending apps has also created issues like excessive interest rates, unethical recovery practices and data privacy. The recently issued digital lending guidelines strike a balance between consumer protection and fostering innovation,” he added.
The governor further pressed on the need for placing adequate attention on governance and business conduct.
(Photo credit: AFP)
“Fintechs poised for a giant leap”
The governor applauded the fintech industry and players for bringing out innovation and laid emphasis on their growing partnership with traditional financial institutions.
“We see fintechs as a force multiplier; they can be used for further penetration of credit. More and more FIs are investing and partnering with fintechs, and also building in-house products for consumers. This would only push for further financial inclusion,” he said.
Referring to the monopoly of players like big tech firms, the governor called for fintechs to pay closer attention to maintaining competition, cybersecurity concerns, data protection, and minimise “concentration of risks”.
The governor said the RBI was working on phased implantation of Central Bank Digital Currencies (CBDC), also known as digital banknotes, and will first try the same with wholesale transactions followed by retail.
“FLDG model under examination”
On the FLDG (First Loss Default Guarantee) model, the governor said “it’s under examination and the regulator has not decided yet but consultations have completed”.
“If anyone has any difficulty you are always welcome to come to the RBI office,” he added.
FLDG is an arrangement between a fintech company and a regulated entity (RE), including banks and non-banking finance companies, wherein the fintech compensates the RE to a certain extent if the borrower defaults.