Prioritise Social, Macroeconomic Factors Above Business Interests: RBI Dy Guv To Fintechs

Reserve Bank of India (RBI) deputy governor T Rabi Sankar has said that fintech startups should prioritise social and macroeconomic interests over their business interests. 

Speaking at the Global Fintech Festival (GFF) 2024 on Thursday (August 29), Sankar said that only a self-regulatory organisation (SRO) can inculcate such a culture. 

“Fintechs need to be alert to social and macro-economic interest(s) and priorities and not subsume them to business interest. It is only the SRO that can inculcate such a culture,” the RBI deputy governor said. 

His comments came just a day after the central bank approved the application of Fintech Association for Consumer Empowerment (FACE) to operate as a self-regulatory organisation (SRO) for the fintech sector.

He added that SROs will have to play a “leading role” in fostering competition in the fintech space and removing inefficiencies through the use of technology. Sankar said that the SROs should work “constantly and consistently” to ensure that competition flourishes and markets remain effective and efficient.

“One major function that an SRO is intended to do is to facilitate honest two-way communication between the regulator and the industry,” he added.

On the role of SROs in the larger fintech sector, Sankar said that such organisations can play a role” in the growth of the ecosystem by establishing codes, standards and voluntary compliance mechanisms. 

Noting that the fintech industry in India is still in its early stages of development, Sankar said that the ecosystem has a lot of growing up to do.

As per NDTV Profit, the RBI deputy governor also said that it is the duty of SROs to sensitise the sector and prepare them for smoother implementation of regulatory actions. 

Sankar also reportedly added that SROs can play a meaningful role in building public trust in fintech startups as the sector has not “yet created enough of a track record that enables evaluation of how trustworthy the industry is”.

Meanwhile, at the same event, joint secretary in the Ministry of External Affairs (MEA), Mahaveer Singhvi, reportedly said that homegrown fintech players should focus on creating solutions that address unique challenges faced by developing countries.

“By developing products and huge cases that cater to the needs of these markets, I think Indian fintech firms will be able to expand their global footprint and support the government’s diplomatic efforts and initiatives,” Singhvi said as per news agency PTI. 

The MEA joint secretary also suggested that Indian fintech startups partner with their counterparts in Africa and Southeast Asia to co-develop solutions for financial inclusion. He also pitched for cooperation between local players and those in Europe and America on blockchain-based trade finance platforms.

As the fintech sector continues to grow, it is vital that companies uphold the highest practical standards. This includes ensuring data privacy, preventing financial crimes such as money laundering, and promoting financial inclusion, Singhvi said.

The comments came on the second day of the GFF 2024, which is expected to see participation from over 1,000 speakers including policymakers, regulators, senior bankers, industry captains, and academicians.