No sure-fire way to regulate fintech sector; onus on operators to act in balanced way: RBI executive director Ajay Choudhary

Reserve Bank of India Executive Director Ajay Choudhary on September 22 said there is no “sure-fire way” to regulate fintech players and made it clear that the onus is on such entities to operate in a balanced way.

He said entities in the sector ought to have the right intent while coming out with offerings and robust governance for the orderly growth of the sector.

Indian FinTech market to reach $1 trillion by 2030, says CEA

“There is no sure-fire way to regulate the fintechs in a manner that maximises their positive impact while simultaneously protecting the financial system and customers against the risks,” Mr. Choudhary said speaking at the Global Fintech Fest in Mumbai.

“If the goal is protecting and furthering the interest of customers and orderly development of the financial system then the actor of the great balancing act has to be the fintech sector itself,” he said.

“I believe be in life or in business, balance comes from focussing on the right things. In my opinion it cannot come only from regulation. Regulation can only be a supporting constituent while fintech themselves have to drive the great balancing act,” he added.

Mr. Choudhary said he would prescribe the fintech players to focus on customer centricity and governance and not look at the latter as merely compliance.

The comments come at a time when the RBI has been upping its focus on the fintech sector and its recently released guidelines on digital lending apps have caused a flutter with some entities expressing concerns.

Earlier, Mr. Choudhary said regulators’ key role is to find a balance and added that sustainability is about balancing the needs of the future with the wants of today.

Acknowledging that there is a tech-based transformation across the globe at present and that contribution of fintechs is phenomenal and satisfying, Mr. Choudhary said, “we also need to be mindful about the risk and safeguard the financial system”.

“We are working on developing an appropriate framework for developing the fintech ecosystem to ensure innovation balanced with the stability of the financial system,” he said.

He said the fintech players need to avoid loss to customers, refrain from imprudent lending, avoid discrimination or biased outcomes, minimise adverse outcomes, financial integrity and manage customer experience.

“An entity must attempt to be transparent and making and sharing key fact statements with customers will be a key aspect for customers going ahead,” he added.

He said an additional regulatory objective of competition has arisen due to participation of tech entities in the financial sector both as tech service providers as well as financial service providers.

Mr. Choudhary also said that a pilot project to reduce the time taken for a Kisan Credit Card (KCC) loan taken by farmers to a few minutes from the present 3-4 weeks courtesy the automation tools.

“The pilot is being carried out in Tamil Nadu and Madhya Pradesh through automation and integration of data providers,” he said.

“The credit disbursal from the loan application to disbursement in the KCC up to ₹1.6 lakh can be done in a few minutes, compared to 3-4 weeks of processing time earlier,” Mr. Choudhary said.

“We simply integrated and accordingly we tried to connect it to all the data provided so that seamless movement of credit can be there,” he said.

Mr. Choudhary said if successful, the pilot will bring down cost, turn around times and improve the customer experience. All it takes for such a project to work is the integration of “small pieces” in the bank, but rued that the same has not happened for “umpteen number of years”.