- RBI announced a new department would exist to monitor the fintech in India shortly.
- Banks are facing serious threats from fintech companies and also from large technology companies who are entering financial services.
- The rapid growth of technology in financial services and banks lead to the need for harnesses.
Fintech- a new era of the financial world that stepped in India and grew rapidly over the years. The fintech landscape is very huge in India which is segmented in majorly 3 portions, payment processing, banking, and trading.
“The RBI has decided to set up an exclusive department of Fintech to focus on digital transactions and adoption of technology across all aspects of banking and non-banking services,” RBI Governor Shaktikanta Das said in an interview.
RBI has always encouraged digitalization in the banking sectors and payment services by revising the fees regularly. Moreover, it provides a digital platform for the customers to carry out their transactions using technology.
Additionally, Many authorities in Singapore issued licenses to the pure digital banks which made RBI think of bringing fintech too under its jurisdiction.
Views on Digital Payment Mode
As mentioned by the Governor, RBI has always encouraged new methods of payments. And also the competition that has intensified in the past years.
Focusing on the ongoing trend of digitalization the Governor stated,
“We’re keeping track of what’s happening. However, so far as India is concerned it’s a new era so we will watch it and if required intervene at the appropriate time”.
Various steps have also been taken in the same regard to promoting digital transactions. For example, from Jan 1, the MDR (Merchant Discount Rate) has been nullified for the companies with a minimum turnover of Rs 50 Cr by the central government.
On the other side for the customers, the National Payments Corporation of India revised rates for transactions done using Debit/Credit card or through other digital payment options in September 2019.
The revised rates have inversely affected the payment industry. Moreover, which has appealed to the government to roll back the decision but left fruitless.
The Governor also stated that,
The RBI has no issue if the whole process starting from KYC until the lending is done digitally or if banks receive applications online and give loans.
Be Alert- Says the Governor
Speaking about the viability of the payment companies that aim at maximum market space by having discounts and cashback. Additionally, Governor specifies the Investors or the Lenders need to examine the Business Model instead before proceeding.
Asked if any restrictions were being put up, the Governor replied that nothing would be imposed at present. As he believed that if something new is happening, then it should not be killed from day one by bringing them under any restriction rather allow them to reach the threshold.
Talking about the sustainability of any business model, the Governor specified “ There should not be concentration. But yet not too many players also, which would make a business model less viable. Basically, we want to generate competition which will bring greater efficiency”.