Ajay Choudhary, executive director of the Reserve Bank, said on Thursday that there is no “sure way” to regulate fintech players, making it clear that it is up to such entities to operate in a balanced way.
He said entities in the sector must have the right intent while coming up with offers and robust governance for the orderly growth of the sector.
“There is no foolproof way to regulate the fintechs in a way that maximizes their positive impact while protecting the financial system and customers from the risks,” said Mr Choudhary speaking at the Global Fintech Fest here.
“If the goal is to protect and promote customer interests and an orderly development of the financial system, then the actor of the great balancing act must be the fintech sector itself,” he said.
“I believe in life or in business, balance comes by focusing on the right things. In my opinion, it can’t come from regulation alone. Regulation can only be a supporting element, while fintech itself is the great balancing act should drive,” he says. added.
Mr. Choudhary said he would direct fintech players to focus on customer focus and governance, and not view the latter as mere compliance.
The comments come at a time when the RBI has increased its focus on the fintech sector and the recently released guidelines on digital lending apps have sparked an uproar among some entities who have expressed concerns.
Earlier, Mr Choudhary said the main role of regulators is to strike a balance and added that sustainability is about balancing the needs of the future with the wants of today.
Choudhary recognizes that a technology-based transformation is currently taking place around the world and the contribution of fintechs has been phenomenal and satisfying.
“We are working to develop an appropriate framework for the development of the fintech ecosystem to balance innovation with the stability of the financial system,” he said.
He said the fintech players must avoid loss to customers, refrain from reckless lending, avoid discrimination or biased outcomes, minimize adverse outcomes, maintain financial integrity and manage the customer experience.
An entity should try to be transparent, and making and sharing key factual statements with customers will be an important aspect for customers continuing, he added.
He said an additional regulatory target of competition has arisen through the participation of technical entities in the financial sector, both as technical services and financial services companies.
Mr Choudhary also said a pilot project to reduce the time farmers take for a Kisan Credit Card (KCC) loan taken by farmers to a few minutes from the current 3-4 weeks, thanks to the automation tools .
The pilot is being conducted in Tamil Nadu and Madhya Pradesh through automation and integration of data providers, he said.
“The credit disbursement of the loan application disbursement in the KCC up to Rs 1.6 lakh can be done in a few minutes” compared to 3-4 weeks processing time earlier, Mr Choudhary said.
“We simply integrated it and accordingly we tried to connect it with all the data provided so that credit can be transferred seamlessly,” he said.
Mr Choudhary said that if the pilot is successful, costs will decrease, lead times will be reduced and the customer experience will improve. All it takes to make such a project work is the incorporation of “little pieces” into the bank, but lamented that the same has not happened for “countless years”.
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