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regular-article-logo Monday, 17 June 2024

RBI increasing vigil on fintech firms, signals end to years of light-handed regulation

Fintech firms and their investors were given a foretaste of that approach last month when the Reserve Bank of India ordered sector giant Paytm to wind down its banking unit due to, what it termed, persistent non-compliance with regulations

Our Bureau And Agencies Mumbai Published 22.02.24, 09:54 AM
Union Finance Minister Nirmala Sitharaman with Reserve Bank of India Governor Shaktikanta Das during the Financial Stability and Development Council Meeting, at Vigyan Bhawan, in New Delhi

Union Finance Minister Nirmala Sitharaman with Reserve Bank of India Governor Shaktikanta Das during the Financial Stability and Development Council Meeting, at Vigyan Bhawan, in New Delhi PTI photo

From hiring analysts to scrutinise customer data to holding frequent meetings with executives, India’s financial regulator is bolstering oversight of fintech firms in a signal of an end to years of light-handed regulation of a key business sector.

Those steps from the Reserve Bank of India (RBI) come after regular inspections over the past year found a number of fintech firms have been lax in following, for example, customer due diligence, five sources with knowledge of the matter said.

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Fintech firms and their investors were given a foretaste of that approach last month when the RBI ordered sector giant Paytm to wind down its banking unit due to, what it termed, persistent non-compliance with regulations.

That directive, which stirred disquiet in the sector, was followed by a separate order this month to Visa asking it to stop business-to-business card payments through third party fintech firms.

The RBI’s moves come as financial regulators in other major markets, including in China, crack down on rule violations and frame new regulations for the fintech sector after having taken a laissez-faire approach for a long time.

“The RBI is very clear, whether you are “fin(ancial) or tech or fintech”, basic rules governing customer identification and a clear footprint of fund flows have to be followed,” said one of the sources.

FM meets regulators

Finance minister Nirmala Sitharaman on Wednesday asked financial sector regulators, including the RBI, to take further measures to check spread of unauthorised lending through online apps.

Addressing the 28th meeting of the Financial Stability and Development Council (FSDC) here, Sitharaman also asked regulators to maintain constant vigil and be proactive towards detecting emerging financial stability risks, given the domestic and global macro-financial situation.

The FSDC deliberated on issues related to macro financial stability and India’s preparedness to deal with them, an official statement said.

Reuters and Our Delhi Bureau

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