RBI Chief Ask Fintechs To Pay Attention To Governance, Regulatory Compliance

Reserve Bank of India (RBI) Governor Shaktikanta Das on Tuesday (September 20) said that the Indian fintech ecosystem should pay due attention to governance, regulatory compliance and risk mitigation frameworks. 

“I wish to assure the fintech community that the RBI will continue to encourage and support innovation. At the same time, we would expect the ecosystem to pay attention to governance, business conduct, regulatory compliance and risk mitigation frameworks,” said Das. 

He also said that the ‘fintech road’ ahead is bound to see more players coming in and it is imperative for every player to follow ‘traffic rules’ for their own safety and for the safety of others.

Das made the comments while addressing the Global Fintech Fest 2022 in Mumbai. The event saw big political leaders, including Finance Minister Nirmala Sitharaman, and other industry veterans in attendance.

The RBI governor also noted that while the central bank supports innovation in the fintech arena, it is equally important that adequate attention is paid to governance and conduct issues. He further noted that while innovations are welcome, the fintech startups ought to enhance the efficiency and resiliency of the financial system while benefiting the consumers. 

He also urged the fintech startups to deploy fair and transparent governance structures to ensure their long-term sustainability. 

“Robust internal product and service assurance frameworks, together with fair and transparent governance, will go a long way to safeguard the interest of customers and ensure long-term sustainability of the fintech entities themselves,” Das said. 

He also called on the fintech startups to shore up due diligence in matters regarding their outsourced activities. 

“The level of due diligence and oversight exercised by the regulated entities on their outsourced activities needs to be strengthened further. This would help in proactive mitigation of risks at the incipient stage itself,” said Das.

Digital Lending, Big Techs On The Target

The RBI governor also flagged concerns on ‘unbridled mushrooming’ of digital lending apps. He noted that the RBI has adopted a multi-agency approach to address the issue and ensure due diligence by regulated entities. 

Taking potshots at big tech companies, Das said that a few entities are leveraging enormous amounts of data just by virtue of their huge customer base.  

“Such developments raise concerns on concentration risk and potential spillovers as their level of engagement with the financial system strengthens in the years to come. Therefore, potential risks to public policy objectives of maintaining competition, market and business conduct, operational resilience, data privacy, cyber security and financial stability need closer attention,” Das added. 

The RBI chief said that the central bank was actively working towards a phased implementation of the Central Bank Digital Currency (CBDC) in both wholesale and retail segments.

‘Fintech, A Force Multiplier’

In words of encouragement for the fintech startups, Das said that the industry is working in tandem with technology and innovation to contribute to the dynamism of the sector. 

“We see (a) lot of opportunities not only for enhancing the scope and depth of all that is happening in the fintech sector, but the way it can deepen financial inclusion, enhance and broad base its footprint in the journey of our country towards 2047. I think there is a lot of potential and if the regulator and the fintech players work together, we can create several milestones in our journey towards India at 2047,” the governor said.

He also noted that the next decade of finance will be more focused on sustainable development and technology-led innovations directed at common people.

This is the third edition of the Fest and is organised by the National Payments Corporation of India (NPCI), the Fintech Convergence Council (FCC) and the Payment Council of India (PCI).

According to Inc42, the country’s total addressable fintech market opportunity is expected to reach $1.3 Tn by 2025.