RBI Working On ‘Developmental’ Regulations For Fintechs: Deputy Governor

The Reserve Bank of India (RBI), which has come out with a slew of guidelines and directions to better regulate the fintech ecosystem in the country, is working on more regulations that will be ‘developmental’ for fintech startups, its deputy governor T Rabi Sankar said on Friday (July 7).

“We are working on regulations (that) would be specific to fintech entities and the fintech ecosystem,” T Rabi Sankar said at an event in Bengaluru. 

Talking about the initiatives taken by the central bank to help the fintech ecosystem, including issuing regular guidelines and the regulatory sandbox framework, Sankar said, “The RBI plays the role of a regulator as much (as) it does in developing the fintech ecosystem.”

He also lauded Indian fintech startups, saying their innovative solutions have brought down costs, refocused products and services and improved customer reach and experience.

The RBI deputy governor also highlighted that the central bank set up a dedicated fintech department last year to help the sector and is watching the sector closely.

Talking about innovations in the fintech space, Sankar said time, access and data are the three key elements driving innovation. However, he also took a dig at fintech startups, saying innovation should not be about exploiting regulatory arbitrage.

“For example, when authorities are clamping down on cryptocurrencies globally, the argument that ‘innovation is being stifled’ is not valid,” said Sankar, adding that similar to the US SEC, the RBI is not here to stifle innovation but fraud.

The central bank has been monitoring the fintech space lately to ensure financial stability and mitigate risks related to cybersecurity and prevent fraud, he added.

Sankar said the RBI is debating if regulatory interventions are required for the fintech sector, and if yes, to what extent, so that there is enough space for the industry to grow.

The RBI is talking to fintech companies and any regulations in that regard will only be after ‘close consultation’ with the industry, he added, without providing a timeline.

Fintechs need to devote their attention to governance, compliance, business conduct, and adopting risk mitigation practices for long-term business stability, Sankar said, adding that any innovation should be ‘responsible and beneficial’.

“I would urge fintech players to contribute in the development of the sustainability of the sector and ensure responsible digital innovations,” added Sankar.

The comments come at a time when the RBI has taken a number of steps to better regulate the fintech space over the last year or so, including issuing digital lending guidelines, coming out with directions on use of UPI by issuers of prepaid payment instruments (PPIs), and releasing default loss guidelines (DLG).