Regulatory Guidelines For Fintechs Should Not Be Unpredictable: KreditBee CEO

At a time when the Reserve Bank of India (RBI) is in the process of coming out with guidelines for various sub-sectors of the fintech ecosystem, KreditBee CEO and cofounder Madhusudan Ekambaram has said that the new guidelines should not be “unpredictable”.

Speaking on the second day of Inc42’s Fintech Summit, Ekambaram said that the expectations of guidelines can go wrong by a few degrees, but there should not be a U-turn.

“Maybe there is also a skeleton structure required that can help fintechs to understand the (regulators’) thought process or the future expectations,” he added.

The RBI recently said that non-bank prepaid payment instruments (PPIs) issuers cannot load PPIs from credit lines. Following this, many fintech startups, including KreditBee, Jupiter, and EarlySalary, reportedly halted customers’ transactions on their prepaid cards.

Besides, the central bank is also set to introduce other stricter guidelines for digital lenders, including buy now pay later (BNPL) players, after receiving several complaints from users over the disbursement of loans without consent.

Speaking on similar lines as Ekambaram, UNI founder and CEO Nitin Gupta said, “I would expect a little bit more predictability around licences, around what’s going to happen. That would be my ask to the central regulator.”

However, Gupta also noted that while the central bank is more conservative at times, its decisions always work in the long run. The RBI is also extremely pro-consumer, he added.

The RBI sees banks as a structural pillar in the payments ecosystem, hence they are offered more flexibility than others like non-banking financial companies (NBFCs), Gupta added.

Gaurav Hinduja, cofounder and MD of BNPL startup Capital Float, noted that traditionally regulations in the payments ecosystem have been designed in such a way that it is not a level playing field between NBFCs and the banks. 

“We still want the regulator to make sure that we all are regulated in some shape or form, meaning we have some kind of regulated entity and we report to the RBI, which is fine, but don’t create gaps in what has now become a pretty well-established consumer experience,” Hinduja said on the regulations for fintechs.

It would be interesting to see what the RBI guidelines on digital lending are going to look like on the KYC (Know Your Customer) front as well as more digital onboarding, he added. Hinduja also said that credit has to grow 2X or 3X of the GDP for a country to grow, and the RBI also realises this.  

Gupta also said that one of the biggest differences between the BNPL industry in India and the rest of the world is the regulations. Unlike the global trend of BNPL being run as merchant payments and as an unregulated entity, in India, 99% of BNPL has been run by regulated lenders, and as result, the fundamental requirements are in place, he added.

It must be noted that in its ‘Payments Vision 2025’ document, the central bank said that it would examine the BNPL model and explore issuing appropriate guidelines for it.

According to a report by Statista, digital lending is one of the fastest-growing fintech segments in India and the market is expected to reach a size of $350 Bn by 2023.