RBI Deputy Governor Urges Fintech Firms to Prioritize National Interest

The Reserve Bank of India (RBI) Deputy Governor T Rabi Sankar emphasised the need for the fintech sector to align with national interests rather than prioritising business gains. Speaking at the Global Fintech Fest, Sankar highlighted that much of the fintech industry remains unlicensed and unregulated, unlike traditional financial institutions.

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Fintech Sector's Responsibility

Sankar stressed that as the fintech sector matures, it must adopt responsible behaviour akin to regulated entities like banks and non-bank lenders. He pointed out that many well-known fintech companies have had Chinese ownership, raising concerns about foreign influence in digital lending.

The Deputy Governor urged fintech companies to be mindful of social and macroeconomic priorities. "Fintechs need to be alert to social and macroeconomic interests and priorities, and not subsume them to business interests," he said. This call for responsibility comes a day after the RBI granted a licence to a fintech association to act as a self-regulatory organisation (SRO).

Role of Self-Regulatory Organisation

Sankar outlined the SRO's role in ensuring that all its members adhere to ethical practices. He warned against predatory pricing strategies where companies incur losses to offer cheaper services. Instead, he encouraged using technological advancements to reduce service costs responsibly.

"It is the responsibility of the SRO to ensure that no questionable practices are followed by the fintechs," Sankar stated, emphasising the importance of fair play. He also highlighted the need for effective communication between regulators and fintech companies.

Compliance and Regulation

RBI Executive Director P Vasudevan echoed Sankar's sentiments, urging fintech firms to prioritise compliance. "Sometimes when we meet venture capitalists and co-founders, we tell them very clearly that please imbibe the element of compliance in your investment entities and see to it that compliance is never compromised irrespective of scale," Vasudevan said at the same event.

Vasudevan assured that the RBI is working to make regulations easier and reduce compliance costs for fintech companies. This approach aims to balance regulatory requirements with operational efficiency.

Central Bank Digital Currency

Sankar also discussed the potential growth opportunities for central bank digital currency (CBDC). He launched a programmability application for CBDC but did not provide specific targets or timelines for the retail CBDC pilot's completion. "Addition of newer features on the CBDC will increase the usage of CBDC," he noted.

The RBI's focus on responsible behaviour, compliance, and innovation underscores its commitment to fostering a trustworthy and efficient fintech ecosystem in India.