“We don’t have a separate regulatory framework for what is known as a digital financial institution,” Das mentioned, talking at financialexpress.com’s Modern BFSI Summit. “I really feel there is no such thing as a want for any financial institution to arrange a separate digital financial institution, to have a type of parallel entity in the identical enterprise. What they’ll obtain by having a parallel entity they’ll very properly obtain as part of their very own organisation. There had been some strategies which got here, however we felt that it carries sure dangers with it. So we’ve not accepted that in the mean time.”
In November 2021, Niti Aayog had floated a dialogue paper providing a roadmap for a regime for licensing and regulation of digital banks in India. The paper had prompted massive banks to start out devising plans to construct digital banks of their very own in readiness for a licensing regime.
On the rising presence of huge expertise firms, or Big Tech, within the monetary companies area, Das mentioned this poses dangers round competitors and knowledge safety. The regulator is, due to this fact, working to evolve an acceptable method to regulating fintechs, which might be activity-based, entity-based, outcome-based or a mixture of all three, he added.
Big Tech firms with a non-financial background which have entered the monetary companies area may doubtlessly be a supply of disruption to the monetary system, the governor mentioned. “As you’d remember, such firms, whether or not from e-commerce, social media and search engine platforms, trip hailing and related companies have began to supply monetary companies in an enormous method on their very own or on behalf of others,” Das mentioned. These firms have an unlimited quantity of buyer knowledge which has helped them to supply tailor-made monetary companies to entities and people missing credit score historical past or collateral.
The governor took difficulty with the development of banks and different conventional lenders utilising platforms offered by fintech firms of their inner processes for credit score threat evaluation. “Such massive scale use of recent methodologies in credit score threat evaluation can create systemic considerations like over-leverage, insufficient credit score evaluation and so on,” Das mentioned, including that authorities and regulators should strike a tremendous stability between enabling innovation and stopping systemic dangers.
Big Tech additionally poses considerations associated to competitors, knowledge safety, knowledge sharing and operational resilience of vital companies in conditions the place banks and non-banking monetary companies (NBFCs) utilise the companies of such tech firms. These considerations may even materialise in sectors aside from monetary companies, Das mentioned.
“The provision of economic companies by the digital channel, together with lending by on-line platforms and cellular apps, have introduced in points referring to unfair practices, knowledge privateness, documentation, transparency, conduct, breach of licensing situations, and so on,” Das mentioned, including that the RBI will quickly difficulty appropriate tips and measures to make the digital lending ecosystem secure and sound whereas enhancing buyer safety and inspiring innovation.
The regulator’s method to Big Tech regulation is to intently watch the phrases of partnerships between banks, NBFCs and fintechs, as there have to be dos and don’ts with regard to what regulated entities can and can’t outsource to fintechs.
While making a case for higher administration of dangers by fintechs, Das noticed that the RBI doesn’t wish to stifle innovation within the early levels of improvement of an ecosystem like Buy Now, Pay Later (BNPL). “Our job as a regulator is to maintain assessing what sort of leverage is being constructed up within the system and if it should pose a problem on the systemic degree. We watch very clearly what sort of BNPL merchandise the key gamers are providing and how much leverage they’re increase,” Das mentioned, including, “As and when required, we are going to give you tips, however at a really incipient stage, we must always not intervene and kill some new enterprise strategies or fashions.”