Mundra calls for regulating electronic funding platforms

Days after RBI Governor Raghuram Rajan flagged concerns on emerging financial instruments, including crowd-funding, his deputy S S Mundra today said there was a need for bringing in a legislation to regulate electronic fund raising platforms.

"It is near impossible to regulate the behaviour and choices of individuals... Hence, it will be more practical for the regulatory authorities to bring in appropriate regulatory changes in their jurisdictions, which would enable regulation of the aggregators' electronic dealing platforms," Mundra said at the concluding day of the annual bankers summit Fibac here.

The remarks were made in the context of peer-to-peer lending, a flourishing system of lending money to unrelated parties gaining popularity in the West, and crowd-funding which has already started in the country with platforms like Ketto, Wishberry and Start51 among others.

Mundra said bringing in regulations for electronic platforms will make it easier to regulate their activities.

The need, he said, is to regulate such disruptive innovations for the orderly growth of the market.

Speaking at an event last week, Rajan had flagged concerns on crowd-funding, saying, "One of my worries about crowd-funding is that it works while going is good. But when you have to recover (funds), who is going to recover and does it happen especially in an environment where enforcement is difficult in the first place."

Mundra acknowledged that such activities are in their infancy, but have the potential to grow into having significant presence.

"As a regulator, one may not be overtly concerned about the manner in which the finance is raised, but there are concerns around the orderly growth of the system, consumer protection and grievance redressal, disaster recovery and business stability plans for the intermediating electronic platforms," the banker said.