It is the endeavour of the Reserve Bank to mitigate such risks through careful choice of technology and frameworks: RBI report
The central bank also called for legislation to regulate the nascent fintech sector in the country
Trying to keep a balance between innovation and regulations in the fintech sector: RBI
The Reserve Bank of India (RBI) has said that the involvement of big tech companies in the banking, financial services, and insurance (BFSI) segment brings systemic risks along with it.
“…it is the endeavour of the Reserve Bank to mitigate such risks through careful choice of technology and frameworks, while providing an impetus to the fintech in a wide array of useful applications in the financial service industry,” the central bank said in its Annual Report 2021-22.
The RBI also referred to the disruption caused by fintech in the BFSI segment and said that it has been trying to keep a balance between innovation and regulations. The central bank also called for legislation to regulate the nascent fintech sector in the country.
“Even though innovations claim to thrive best when free of regulations, regulations/ legislations are needed for sustainable growth of a sector,” the report said, referring to the fintech sector.
With the increasing impact of the fintech segment on both macro and micro levels, it is pertinent to keep facilitating innovation while also bringing regulatory order in the space, it added.
Fintech startups and digital lenders in the country have seen a sharp growth in the country in recent years and the RBI has been looking at tightening the regulations for the sector.
RBI Governor Shaktikanta Das last month said that the central bank was looking into the complaints against digital lenders and taking action to address the issues quickly.
In fact, last week, banks reached out to RBI about their fears that many fintech companies might not be complying with anti-money laundering guidelines and KYC norms.
Last year, RBI also formed a committee to make a draft report on digital lending that would include lending through online platforms and mobile apps. Das said last month that RBI has received more than 650 suggestions/comments from industry stakeholders on the same.
Earlier this year, the central bank set up a separate fintech department with an aim to facilitate the fast-evolving fintech sector via innovations.
Having a single touchpoint for all issues related to facilitation of constructive innovations and incubations in the fintech sector will certainly bring the required convergence needed to have a unified approach regarding the sector, RBI said in its latest annual report.
The newly created department is also the main house that monitors the crypto segments such as decentralised finance (DeFi), non-fungible tokens (NFTs) and Metaverse closely. It is also closely associated with the country’s central bank digital currency (CBDC) project and its execution.
RBI also touched on the subject of CBDC in its annual report, saying that it is taking a graded approach to introduce CBDC in India.
Meanwhile, fintech adopters in the country are on a rise. As per a recent report, India, at 87%, has the highest number of fintech adopters in the world as against the global adoption of 64%. The Covid-19 pandemic and consequent lockdowns largely triggered this growth.
