RBI urges fintech firms to set up self-regulatory body soon

RBI governor Shaktikanta Das (PTI)
RBI governor Shaktikanta Das (PTI)

Summary

Das said customer centricity, governance and self-regulation are three critical issues for the fintech sector. He asked these companies to use simplified user interfaces and quick customer grievance redressal mechanisms to help build the trust of customers

Mumbai: Reserve Bank of India governor Shaktikanta Das on Wednesday asked fintech players to set up a self-regulatory organization within a year.

Speaking at the Global Fintech Fest, Das said fintech companies need an effective self-regulatory structure.

“They (fintech companies) need to evolve industry best practices, privacy and data protection norms in sync with the laws of the land, set standards to avoid mis-selling, promote ethical business practices, transparency of pricing, etc. I would like to use this opportunity to urge and encourage the fintechs to establish a self-regulatory organization (SRO) themselves," he said.

On Tuesday, RBI deputy governor Rabi Sankar also spoke of the need for an SRO. This is a clear shift from the earlier stance of the central bank that fintech firms need to be regulated.

Das said customer centricity, governance and self-regulation are three critical issues for the fintech sector. He asked these companies to use simplified user interfaces and quick customer grievance redressal mechanisms to help build the trust of customers. “To focus on customers means embracing a customer-centric approach to innovation by understanding the needs of customers, making provisions that protect customer interests and earn their trust," he said. “Avoiding customer harassment is essential to achieving long-term customer trust."

Speaking on the rising instances of breach of data privacy and harsh recovery practices by illegal loan apps, Das said there is an urgent need to ensure that innovations are accompanied by prudential safeguards and responsible conduct.

Das also asked fintech players to proactively adopt high standards of governance. “Effective governance in fintechs requires a collaborative effort involving regulators, industry associations and the fintech community itself," he said.

Speaking on the new platform for frictionless credit, Das said that the RBI is looking at handing it over to a private company in future. RBI is currently piloting end-to-end digitalization of small ticket agricultural loans – Kisan Credit Card or KCC loans – in a few states. The regulator is looking to develop this into a platform to provide frictionless credit for all segments of loans.

“We want to make it an open platform. We will gradually withdraw and hand it over to a private company like RBI did in the case of NPCI. It will be an open architecture where any bank and NBFC can onboard and continue with lending activity," said Das.

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