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Mumbai: The Reserve Bank of India (RBI) has set up an inter-regulatory working group to study issues concerning financial technology and digital banking and reorient regulation for the sector.

“The Financial Stability and Development Council - Sub Committee (FSDC - SC) at its meeting held on April 26, 2016 had decided to set up such a Working Group to look into and report on the granular aspects of Fin Tech and its implications so as to review and appropriately reorient the regulatory framework and respond to the dynamics of the rapidly evolving Fin Tech scenario," said a circular on the website of the RBI.

The 13-member working group will be chaired by Sudarshan Sen, executive director at the central bank. Members include representatives from the Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDA), Pension Fund Regulatory and Development Authority (PFRDA), various departments of the RBI and one representative from the banking sector. A.P. Hota managing director of National Payments Council of India (NPCI) will also be among members.

The panel will scope the developments in the Fin Tech space relating to technological platforms, major innovations, key players and how markets have adopted these new developments.

It will also assess opportunities and risks arising for the financial system from digitisation and use of financial technology, and how these can be utilised for optimising financial product innovation and delivery to the benefit of users and other stakeholders. Cross country practices would be noted as well, and several models of successful regulatory responses elsewhere would be studied.

The panel will frame an appropriate regulatory response with an aim to enhance Fin Tech and digital banking opportunities and also manage risks and challenges.

Members will also assess the implications and challenges for the various financial sector functions such as intermediation, clearing, payments being taken up by non-financial entities.

India’s financial services system has seen a number of financial technology companies pop up over the last few years. Mobile wallet firms and online credit providers have been able to build a large enough market to cause banks to buck up and come out with solutions of their own.

The NPCI launched the unified payments interface (UPI) in April, allowing customers to perform interbank transactions on a real time basis, with only a single identifier code, thereby eliminating the need to exchange bank sensitive information. The banking regulator has also decided to include financial technology companies in its regulatory framework and acknowledge them as serious participants. The RBI had released a set of draft guidelines for peer-to-peer (P2P) lending companies in April, where it looks to recognise these firms as non-banking finance companies.

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