An inter-ministerial panel on fintech on Monday submitted its report to Finance Minister Nirmala Sitharaman suggesting a comprehensive legal framework to protect consumers of digital services.
The Steering Committee headed by the Economic Affairs Secretary also recommended adoption of regulation technology (or RegTech) by all financial sector regulators to develop standards and facilitate adoption by financial services providers.
"Similarly, it has also suggested that financial sector regulators develop an institutional framework for specific use-cases of Supervisory technology (or SupTech), testing, deployment, monitoring and evaluation," the finance ministry said in a statement.
"The Committee also recommends a comprehensive legal framework for consumer protection be put in place early keeping in mind the rise of fintech and digital services," it added.
Following the deliberations of the committee, it was considered necessary to have a nodal agency to coordinate developments across ministries and regulators in the area of financial technology (fintech).
A dedicated team on digital economy and fintech is being set up in the Investment Division, Department of Economic Affairs for coordination on fintech with relevant ministries, it said.
The committee was constituted following the announcement made by the then Finance Minister Arun Jaitley in Budget 2018-19.
"Use of fintech in financing space will help growth of MSMEs. A group in the Ministry of Finance is examining the policy and institutional development measures needed for creating right environment for fintech companies to grow in India," he had said.
The report outlines the current landscape in the fintech space globally and in India, studies the various issues relating to its development and makes recommendations focusing on how fintech can be leveraged to enhance financial inclusion of MSMEs.
The panel has also recommended that insurance companies and lending agencies be encouraged to use drone and remote sensing technology for crop area, damage and location assessments to support risk reduction in insurance/lending business.
Given the rapid pace at which technology is being adopted primarily by private sector financial services, the report said the Department of Financial Services (DFS) should work with PSU banks to bring in more efficiency to their work and reduce fraud and security risks.
Significant opportunities can be explored to increase the levels of automation using artificial intelligence (AI), cognitive analytics and machine learning in their back-end processes, it said.
The committee also suggested a special drive for modernisation and standardisation of land records by setting up a dedicated National Digital Land Records Mission based on a common National Land Records Standards with involvement of state land and registration departments, with a view to making available land ownership data on an online basis to financial institutions.
The report favoured setting up of an Inter-Ministerial Steering Committee on Fintech Applications in the Department of Economic Affairs (DEA) to monitor progress, including exploring and suggesting the potential applications in government financial processes and applications.
The Inter-Regulatory Technical Group (IRTG) set up under the Financial Stability and Development Council (FSDC) will be the forum of inter-regulatory coordination on fintech, it said.
Other members of the committee include Secretary Financial Services, MSME Secretary, UIDAI CEO and Deputy Governor of RBI.