RBI advises fintechs to focus on governance, data protection issues

In a meeting with select financial technology (fintech) entities and their industry associations on Wednesday, the Reserve Bank of India (RBI) advised these new-age firms to focus on governance issues, data protection, and regulatory compliance, while playing a transformative role in the financial systems through their innovations.

The meeting was presided over by RBI Governor Shaktikanta Das, Deputy Governor M K Jain, and a few senior officials of the central bank.

The RBI has been regularly interacting with all stakeholders in the financial sector, including banks and non-banking finance companies, to gauge the mood on the ground and seek views on the bottlenecks they are facing. This meeting with fintechs was on similar lines.

Das advised fintechs to pay close attention to governance, business conduct, data protection, customer centricity, regulatory compliance, and risk mitigation frameworks. He also reiterated the RBI’s commitment to these new-age companies that the central bank would continue to adopt a participative and consultative approach to facilitating innovations in the financial sector.

In the past few months, the RBI has tightened the regulatory noose around the fintech sector, given how interconnected they have become with financial entities in delivering financial services to customers.

The RBI brought in the digital lending guidelines earlier this year, which aim at plugging the loopholes that some of these new-age firms were taking advantage of to create products around it.

While firms have made the operational changes to comply with the new regulations, the industry associations have sought time from the central bank to clear the air on certain issues where there is interpretational ambiguity.

At the meeting, Das praised the fintechs and start-ups that have played a transformative role in the financial system through digital innovations and novel means of delivery of financial services. He highlighted the proactive and supportive role of the RBI in providing a conducive policy environment for responsible innovation.

The participants shared their inputs and suggestions to enhance and deepen the role of fintechs and the related ecosystem in the country, the RBI said in a statement.

In the past, the governor has expressed concern that while the use of technology has made financial entities more efficient, it has also led to the backdoor entry of unregulated players into the financial space that often does not abide by norms, leading to several areas of distress, including mis-selling, breach of customer privacy, unfair business conduct, usurious interest rates, and unethical loan recovery practices.