Indian regulators need to continuously work to redefine regulations and regulatory framework to support innovations in the fintech industry, a top Reserve Bank of India (RBI) official said on November 23.

The Indian fintech space needs regulations and regulatory framework to innovate further, said M Rajeshwar Rao, Deputy Governor, Reserve Bank of India (RBI).

“We also need to continuously work to redefine regulations and regulatory frameworks to support these innovations and delivery,” Rao said at a banking conference in Mumbai.Rao further said that the collaboration between banks and fintechs is aiding innovations.

“We love the fact that national banking is fast becoming a reality aided by innovations in the FinTech space,” Rao said.

The Indian fintech industry has been growing at a faster pace over the last few years, particularly in the payment and credit businesses. Fintechs typically operate in partnership with banks and non-banking finance companies.

RBI Governor Shaktikanta Das, on September 6, urged fintechs to establish an SRO over the next year. “I would like to use this opportunity to urge and encourage the fintechs to establish a Self-Regulatory Organisation themselves,” Das said in a speech at Global Fintech Fest (GFF) 2023 in Mumbai.

Das further said, “Digital innovations, at times, have also led to cyber-risk and data security-related issues. Illustratively, the mushrooming of illegal loan apps, many of which had their origins in foreign jurisdictions, has led to serious concerns about breaches of data privacy, unethical business conduct, the levying of exorbitant interest rates, and harsh recovery practices.”

Following the October 2023 MPC meeting, Das said that RBI is planning to issue a framework for SROs for regulated entities (REs).

Moneycontrol reported that industry players are involved in discussions with RBI for a self-regulatory organisation (SRO) for the fintech and digital lending industries. The same is expected to come up in the next three to six months.

An SRO is a non-governmental organisation (NGO) that sets monitoring standards for industry players and works as a bridge between the industry and the regulator. For example, MFin is an SRO for the microfinance sector.

Industry players from the Digital Lenders Association of India (DLAI) and the Fintech Association for Consumer Empowerment (FACE) said that discussions are constantly on with the Reserve Bank of India (RBI) to formulate an SRO for the industry.

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