RBI has set up a working group of inter-functional regulatory panels to study issues related to regulating the functioning of Fintech companies and banking digitally in India. With more than 30 players in Indian P2P lending currently, the market size is slated to cross the US $4-5 billion by 2023. RBI has finally issued guidelines to better P2P lending, regulate it and make it trustworthy.
The RBI study of the emerging sectors of Fintech and banking has recommended a “regulatory sandbox” to encourage new initiatives. Also, a law relating to the protection of data.
Importance Of Data Across Various Departments
Access to APIs of banks for small companies is a huge problem and risk to the banking institution itself. Thus the sandbox hub is a safe environment to launch trials of fintech innovations and enable a trial version under the supervision of the regulator. This way, innovative products do not pose a destabilising risk.
Further, it provides support by regulating the sector and increases efficiency, reduces risks and creates newer opportunities in the Indian context. The rights over the innovations of these fintech companies get protection while the financial institutions get more unique ways of improving their digital services. It is a win-win situation.
The RBI also suggests a valid law for the protection of data in India. At present, there is no law to protect data. Several laws contain clauses that help define the situation. According to a study, the Fintech industry in India grew 282% to reach $450 million in 2015. At present around 400 such firms are operating in the country and their investments are expected to increase by 170% by 2020. A law is on the anvil! In reality, the symbiotic relation of various sectors involved moots the formation of rules and a framework to work in.
Other Fintech Sandbox Initiatives – ICICI, Kotak, Yes, SBI
Chief Minister of Maharastra Devendra Fadnavis has said that the government has provided cheaper electricity, tax benefits, financial incentives, support and internet connectivity for these initiatives. They also held a conference on blockchain technology last year, and lenders like YES Bank, SBI, and Kotak Mahindra Bank have already entered into agreements to adopt it.
The YES Bank has diversified its interests. The bank has now launched YES SCALE — a multi-sector acceleration programme where YES Bank will accelerate initiatives in various sectors such as Smart City, Agritech, Fintech, Edutech and so on. ICICI too has rolled out some initiatives as part of an organisation-wide recast programme. The Kotak Bank and SBI, in turn, have also adapted and have started their limited trial versions in their sandboxes.
The Singapore Authority, European nations, and even the Middle East have all started sandboxes. A regulatory sandbox would level the playing field, and more innovations will happen because of the controlled environment and accessibility to resources for everyone. This is a welcome and well-thought-out initiative where many sectors reap the benefits of technology.